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: August 4, 2009
The Trend and Momentum Indicators:
Short-Term Trend: With stocks overbought, we're not going to be complacent with our trend ratings. Thus, we'll watch this morning's early pullback for an opportnity to downgrade the short-term trend rating a notch to moderately positive.
Intermediate-Term Trend: The current blast higher causes the analysis of the intermediate-term trend to be a broken record. Yet another new cycle-high on the indices means the intermediate-term trend remains positive at the present time. We would downgrade the trend rating on a move below 968.
Market Internals: Both our short-term and intermediate-term trend-and-breadth-confirm models remain positive today. Although even a modest decline in breadth could cause our "hair trigger" breadth indicator to move to neutral… something to watch.
Market Momentum: Our momentum indicators remain positive on balance. We will be watching how these indicators react to any decline in the near-term for clues as to the staying power of this rally.
The Early Warning Indicators:
Overbought/Oversold Condition: Sorry, but once again it's the same song, different day… Stocks remain overbought on a short-term basis and are now becoming overbought on an intermediate-term basis.
Investor Sentiment: As the enthusiasm for the current rally builds, so does optimism toward the market. The problem with this situation is history shows that whenever optimism becomes too high, it means that investors have already made their buys - leaving the market susceptible to bad news.
Current Strategy:
While the market seems to defy logic at the present time, such is the game when recessions come to an end. Thus, we will keep things simple here and continue to look to "buy the dips." However, a close below 968 on the S&P might cause us to reconsider and a move below 950 would be a sign that there are problems afoot.
We're Short-term Buyers At: A pullback to 970 - 975 on S&P
We'd be Short-term Sellers at (or near): A close below 974 on S&P
S&P 500:
NASDAQ Composite
The indicators we have displayed on the chart above include: 100 day exponential moving average (blue), 50 day simple ma (purple), 25 day simple ma (cyan), 10 day simple ma (orange), standard deviation bands using 1.9 std dev of 21 day and stochastic %K using 14 and %D.
S&P 500 Intraday
S&P 500 Last 3 months
S&P 500 Last 6 months
S&P 500 Last 12 months
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