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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: February 10, 2012
Our Current Take:
Two items of note from a technical analysis standpoint this morning. First, we are finally seeing what could be the start of a much-anticipated pullback. As such, gauging the action from here will tell us a lot about the likely next direction. Second, the now-familiar intraday pattern of morning selloffs followed by a steady advance for much of the day appears to be, so far at least, continuing. So, it will be interesting to see if (a) the dip-buyers remain active enough to fight off the traders selling due to potential weekend headline risk and (b) if the bears can get anything more than a one-hour wonder going here.
We would consider being short-term buyers at: A successful test of support at 1330 or close over 1353 on S&P 500
We would consider being short-term sellers: A close below 1325 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: Although stocks are pulling back this morning, the s.t. trend remains in decent shape for now.
Intermediate-Term Trend: While the bears could step in and produce a pullback of 3% or so, the intermediate-term trend remains positive at this stage.
Market Internals: Our TBC models have weakened this morning as the s.t. model is now neutral.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: All three of our momentum models continue to carry positive ratings again this morning. This is something to watch going forward as these indicators have done a great job at providing an overall view of the environment.
Support/Resistance Zones for S&P 500:
- Current Support: 1325
- Current Resistance: 1350ish
Early Warning Indicators:
Overbought/Oversold Condition: Although the bears have the ball this morning, the market remains overbought from both a short- and intermediate-term perspective. But as we've been saying, this should be considered a sign of strength.
Investor Sentiment: Our shorter-term sentiment indicators are now at extremely negative readings (meaning there is too much optimism). Should our i.t. models get to the same level, it would time to start hedging long positions.
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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