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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: June 18, 2010
Current Strategy:
Although many may view the move as suspect (can you say "yea, but"), the major indices are all moving to new highs for the current rally this morning, which is always a good sign. But before you start buying things on margin again, it is probably a good idea to remember that the computers have the ability to turn this thing around in a heartbeat. So, while we like the technical action at the moment, we remain wary of the potential for volatility. Bottom Line: As longs as S&P stays above 1103, we're in good shape.
We'd be Short-term Buyers At: A close above 1115 on S&P 500
We'd be Short-term Sellers At: Close below 1103
Trend and Momentum Indicators:
Short-Term Trend: New highs are a good thing... even if they do come on a quadruple-witch day. Fingers crossed that the move can hold up.
Intermediate-Term Trend: The intermediate-term picture continues to improve and several of our indicators are in the green zone, but, unfortunately, the overall trend remains down. As such, we need to treat this rally as a rebound from an oversold condition until it can "prove itself."
Market Internals: Despite the volatility, both of our TBC models remain in positive territory. In short, this is a good thing.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Two of our three momentum models are solidly on buy signals, while our intermediate-term model remains stubbornly neutral. Something to remember if you feel the need to suddenly get aggressive.
Support/Resistance Zones for S&P 500:
- Current Support: 1105
- Current Resistance: 1139
Early Warning Indicators:
Overbought/Oversold Condition: Ditto from yesterday: Stocks remain overbought from a shorter-term perspective. However, stocks remain oversold in the intermediate-term time frame.
Investor Sentiment: After 9 days of rallying, the good news is that sentiment remains rather dour. Thus, we can still put the sentiment indicators in the plus column.
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: 50 day simple ma (purple), 25 day weighted ma (cyan), 10 day exponential ma (thick orange), 200 day simple ma (thin orange), standard deviation bands using 1.9 std dev of 21 day and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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