Technical Talk: Panic Early Or Not At All?March 22, 2012 @ 11:34 AM EST
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: March 22, 2012
Our Current Take:
Traders appear to be invoking the old adage, "Panic early or not at all" today. As such, stocks are now lower for a third day and the decline from Monday's peak is now approaching -1.25%. The question of the day is if this little pullback will continue or become simply another brief adventure to the downside. The chart of the S&P suggests that traders may have some additional room to roam on the downside as support doesn't show up until the 1375 area. And frankly a test of that support would be healthy for the overall market. However, with the end of the quarter looming, we won't be surprised if the dip-buyers return in earnest.
We would consider being short-term buyers at: A close over 1410 on S&P 500
We would consider being short-term sellers: A close below 1388 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: The Short-Term trend is once again under attack and close to being downgraded. But for now we'll call it neutral as all of our shorter-term moving averages remain above their counterparts (i.e. the 5-day is above the 10-day, which is above the 18-day). But with the shortest of our ma's now turning down, this remains something to watch closely.
Intermediate-Term Trend: Although stocks may be entering a consolidation phase, the intermediate-term trend remains positive at this stage. Although we've been saying it all week, it bears repeating that we would need to see a "lower low" on the charts in order to downgrade the i.t. trend - which would mean a close below 1340.
Market Internals: Our short-term TBC model remains neutral today wile the int. term model hasn't budged. Thus, we will continue to watch these indicators carefully to see if any further weakness creeps into the internals.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: All three of our momentum models remain positive this morning. But as we wrote yesterday, since these models are end-of-day oriented and move a bit slower, we wouldn't be surprised to see the readings take a turn for the worse in the next day or two.
Support/Resistance Zones for S&P 500:
- Current Support: 1375
- Current Resistance: 1435ish
Early Warning Indicators:
Overbought/Oversold Condition: The major indices remain overbought from both a short- and intermediate-term perspective. However, the short-term condition is improving modestly today.
Investor Sentiment: The sentiment indicators continue to wave the yellow flag at this point in time as the indicator levels are becoming a problem.
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.
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