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Although we disagree with the idea that "the tape tells all," it is important for all traders to stay on top of key technical happenings on the charts. Below is our current "executive summary" take on the State of the Tape.
Technical Talk: January 23, 2012
Our Current Take:
After opening higher on hopes for a Greek debt deal, stocks are now pulling back. There doesn't seem to be any major headlines associated with the 80 point drop in the DJIA, so we will assume that (a) there may be European rumors we know nothing about or (b) some profit taking/short-selling is taking place ahead of this week's rather abundant calendar (Fed meeting, earnings, GDP, etc). The main point to understand here is that a pullback is to be expected and normal at this stage of the game. As long as the S&P does not breach the 1285-90 area on a closing basis (by any meaningful degree), we would continue to give the bulls the benefit of the doubt here.
We would consider being short-term buyers at: A pullback to test 1300 on S&P 500
We would consider being short-term sellers: A close below 1290 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Although stocks are overbought and due for a pullback, the short-term trend remains positive.
Intermediate-Term Trend: As we written recently, the move to new cycle-highs means the intermediate-term trend is positive.
Market Internals: Our short-term TBC model are both positive this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: All three of our momentum models remain positive this morning and the internal readings are now healthy across the board. It will be important to watch these indicators during the anticipated pullback.
Support/Resistance Zones for S&P 500:
- Current Support: 1300
- Current Resistance: 1350
Early Warning Indicators:
Overbought/Oversold Condition: The short-term overbought condition is back and the intermediate-term indicators remain still neutral.
Investor Sentiment: Our sentiment indicators are starting to line up a little better than we've seen in a while (we are starting to see a little too much optimism in the short-term readings). However, the models are currently neutral overall.
Chart Watch:
Below are snapshots of the two main charts we watch closely each day from a technical perspective. The indicators we display on the charts below include: 5 day weighted ma moved forward two days (blue dash), 10 day weighted ma offset by 2 days (orange), 18 day weithged ma (cyan), and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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