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 6, 2009
The Trend and Momentum Indicators:
Short-Term Trend: With the Jobs report scheduled for release on Friday, it isn't surprising that some of the oomph has come out of the short-term trend and some selling in front of the report as the phrase "event risk" is being bandied about. However, the trend remains positive at the present time.
Intermediate-Term Trend: The intermediate-term trend is clearly positive and would require a "lower low" in order to be downgraded.
Market Internals: No Change - Both our short-term and intermediate-term trend-and-breadth-confirm models remain positive again today.
Market Momentum: Our momentum indicators have finally managed to officially move up into the "positive" mode. For much of the recent rally, one of our models had been stuck in a moderately positive mode. However, they are all now in line in their upper zones.
The Early Warning Indicators:
Overbought/Oversold Condition: Yesterday's little pullback didn't change anything here… stocks remain maximum overbought on a short-term basis and are modestly overbought on an intermediate-term basis.
Investor Sentiment: It bears repeating that our daily sentiment indicator has moved to its highest level since the beginning of 2002 and the "market timers" at Rydex hav the most money in "long" funds since early 2008. However, this is a condition that can last for quite some time. So, for now, we'll simply fly the warning flag.
Current Strategy:
The recent run for the roses has been impressive to say the least. However, with the jobs report on tap tomorrow morning, the action in response to the report ought to be telling. So, for today, we'll sit tight and likely keep our hands in our pockets unless we see a violation of the 988 zone.
We're Short-term Buyers At: A pullback to 980 on S&P
We'd be Short-term Sellers at (or near): A close below 986 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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