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 for: February 25, 2009
Short-Term Trend: The short-term trend remains down. However, yesterday's bounce from the lows establishes a support area in the 742 - 745 zone for the S&P. A successful retest of yesterday's low would cause us to upgrade the rating of the s.t. trend.
Market Momentum: Both the trend and breadth indicators remain negative but volume advanced during yesterday's rally The all-cap market index now needs to advance 7.9% to return to neutral but the A/D line is within 0.01% of returning to neutral, which would upgrade the indicator. Note that the A/D line is sitting almost on its moving, which, as we've been saying daily, can be considered a positive divergence once the selling ends.
Intermediate-Term Trend: Intermediate-Term trend remains negative on S&P 500. However, yesterday's move higher sets up the potential for the indices to put in a higher low.
Overbought/Oversold Condition: The market remains oversold but the indicators are coming off of their lows.
Investor Sentiment: Sentiment remains negative and near the lows. This will at some point be a positive dynamic.
Our Current Plan:
The bottom line is the market is setting up nicely for a meaningful rally. Stocks are oversold; the trend is down but we may have seen a short-term bottom established this week; and sentiment is downright negative (which, of course, is a good thing.) However, during times like these, the buyers will remain on the sidelines until given a reason to act. And right now, that reason is likely to be the government providing details on the bank rescue plan. And since the President didn't even hint at any details being forthcoming, the market will simply continue to wait and likely drift lower in the process.
S&P 500:
S&P 500 Intraday
S&P 500 Last 3 Months
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