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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.
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Technical Talk: August 26, 2010
Current Strategy:
The good news (from the bulls' perspective) is the indices bounced right where they needed to yesterday. The bad news is: (1) stocks bumped into resistance and have so far failed this morning and (2) there are two big events on the agenda for tomorrow morning (GDP revision and Bernanke speech from "The Hole"). So, with the market pulling back at the moment, we'll call the action a retest of support so far. But with it being late August and most traders on hold, well, anything can happen once the computers kick in.
We'd be Short-term Buyers At: A close above 1067 on S&P
We'd be Short-term Sellers At: A close below 1040
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend has improved a bit with the bounce but remains moderately negative.
Intermediate-Term Trend: The intermediate-term trend has also improved as the market appears to be attempting to find a base.
Market Internals: Our short-term TBC model improved a bit with yesterday's advance but both models remain negative.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Nothing new to report from our longer-term momentum models as all three remain negative at the moment.
Support/Resistance Zones for S&P 500:
- Current Support: 1040ish
- Current Resistance: 1070
Early Warning Indicators:
Overbought/Oversold Condition: Despite yesterday's bounce, the market remains very oversold from a short-term perspective and is now neutral on the intermediate-term view.
Investor Sentiment: Sentiment remains dour. This could suggest that the market may have indeed discounted much of the anticipated bad economic news - at least from a big-picture standpoint.
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), and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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