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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: August 31, 2010
Current Strategy:
The stock market continues to be range bound and news-driven. So, with the market near the low end of the range and having gotten some good news this morning, one would assume that stocks would rally. However, with the VIX sitting at support, it appears the bears are not giving up. Perhaps the reason is that every technician knows "it's not the news, but how the market reacts to the news that matters." Thus, if the bears could somehow produce a rally failure here, we might see a whoosh lower. But for now, the bulls appear to be trying to make the best of their good news. Bottom line: looks lilke a basing phase so far.
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 to be downgraded again today due to the failure at resistance yesterday. So, until the bulls can push through 1065, the best we can do in terms of the s.t. trend rating is neutral.
Intermediate-Term Trend: The intermediate-term trend remains neutral as well. In short, stocks have been moving sideways since mid-May. We are continuing to watch the key technical levels for clues as to when the range might break.
Market Internals: Our short-term TBC model has downticked back to negative - so both TBC models remain on the dark side at the present time.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models reversed with yesterday's sell-off. This is an indication of how fragile the market is at the present time.
Support/Resistance Zones for S&P 500:
- Current Support: 1040ish
- Current Resistance: 1070
Early Warning Indicators:
Overbought/Oversold Condition: The market is once again oversold from a short-term perspective and neutral from the intermediate-term point of view.
Investor Sentiment: Sentiment is as pervasively negative as I can recall - sans the crisis period, of course. The outlook for the economys is almost universally negative and people are giving up on stocks in droves. Hmmm.... sounds like a great time to go the other way from a contrarian 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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