Technical Talk: Not Exactly What The Bears Had Planned
January 24, 2012
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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 24, 2012
Our Current Take:
Given that stocks have been up for four weeks in a row, that the market is overbought, and that the indices are bumping into resistance, the bulls have got to be pleased with the action so far today. In short, everyone has been looking for a pullback and despite the fact that conditions are ripe for a couple scary days; so far at least, the pullback has been weak. What is perhaps most impressive is the fact that the dip-buyers remain very aggressive today. With the uncertainty in Europe and the upcoming events in the U.S. (Fed meeting, earnings, and GDP), one might have expected the bears to "have a day" today. But at this stage, the bears are likely very disappointed.
We would consider being short-term buyers at: A pullback to test 1300 or a close above 1320 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 the pullback looked to be underway in the early going, the bulls are making a game of it today. So far at least, the advantage goes to the bulls.
Intermediate-Term Trend: No change. With the indices near new cycle-highs, the intermediate-term trend remains positive.
Market Internals: Our short-term TBC model are both positive again this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Ditto from yesterday... All three of our momentum models remain positive this morning and the internal readings are now healthy across the board. We will be watching closely to see if there are any signs of deterioration tomorrow.
Support/Resistance Zones for S&P 500:
- Current Support: 1300
- Current Resistance: 1350
Early Warning Indicators:
Overbought/Oversold Condition: The short-term overbought condition remains intact and the intermediate-term indicators have also moved up into overbought territory. This is usually a sign that a pullback could occur at any time.
Investor Sentiment: Our short-term sentiment readings are now in negative territory (meaning too much s.t. optimism in the market). However, the intermediate-term indicators remain mixed and neutral. We will suggest that these indicators will have to get overly optimistic across the board before they become a threat to the bulls.
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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