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 14, 2009
The Trend and Momentum Indicators:
Short-Term Trend: Yesterday's close was technically a new cycle high for the Dow and S&P 500. However, neither index was able to clear the range which means the trading range remains intact. But, this morning's negative reaction to UofM's Consumer Sentiment has put the outlook for the near-term trend in question.
Intermediate-Term Trend: Although the trend is looking a little sloppy at the moment, as we pointed out yesterday, the indices are above the short-term and intermedate-term moving averages… both ma's are moving up… and the indices finished yesterday at new cycle highs. Thus, there isn't a lot to complain about from an intermediate-term trend standpoint.
Market Internals: Our trend-and-breadth-confirm model remain positive as both are above their respective moving averages. Stocks have historically gained ground at the rate of 28.35% per year when both models are positive.
Market Momentum: Nothing new to report this morning as momentum remains a little lackluster. While this could be considered a warning sign, we are also mindful of where we are on the calendar. Therefore, we'll let price be the final decider at this time.
The Early Warning Indicators:
Overbought/Oversold Condition: Stocks are modestly overbought on a short-term basis but are now, once again, very overbought on an intermediate-term basis.
Investor Sentiment: As we've been saying all week, the sentiment indicators remains very optimistic, which is always a warning sign that things are getting a little frothy.
Current Strategy:
The weaker than expected reading from the University of Michigan's Consumer Sentiment index (63.2 vs. 69 and last month's reading of 66.0) has put a crimp in the bulls battle cry of "onward and upward." The current 100-point drop doesn't really impact the trend much at this point in time and we'll be waiting for a break in either direction before making any significant moves. The bears are currently adamant that stocks must decline, while the bulls cling to the big-picture improvement in the economy and earnings. Hence the current stalemate.
We're Short-term Buyers At: A successful test of 992 on S&P
We'd be Short-term Sellers at (or near): A close below 990 on S&P
S&P 500:
NASDAQ Composite
The indicators we have displayed on the chart above include: 50 day exponential ma (purple), 25 day exponential ma (cyan), 10 day weighted ma offset by 2 days (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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