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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: September 7, 2010
Current Strategy:
Those of us that have been around awhile probably recall the T.V. ad jingle for GAP stores, "Fall in to the Gap!" In our humble opinion, this old ad campaign best describes what is happening in the market today as traders appear to be targeting Thursday's gap open on the charts. With the market now overbought and nearing the top end of the range, it isn't at all surprising to see the bears trying to reassert themselves into the game here. However, once those gaps are filled, we believe the game will get very interesting.
We'd be Short-term Buyers At: A pullback to 1090 on S&P
We'd be Short-term Sellers At: A close below 1080
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is now overbought and due for a rest. We'd expect to see a test of 1090 and perhaps even the 10-day ma down at 1080ish.
Intermediate-Term Trend: The intermediate-term trend can be considered neutral-to-moderately-positive at the present time. But, then again, this remains a rangebound, news-driven environment.
Market Internals: Both of our TBC models are positive this morning, which has been a bullish condition historically.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models have improved but remain only neutral at the moment. In short, the market will need to "show us something" from a momentum standpoint if there is to be a breakout.
Support/Resistance Zones for S&P 500:
- Current Support: 1090ish
- Current Resistance: 1105
Early Warning Indicators:
Overbought/Oversold Condition: The market is now overbought on a short-term basis meaning that a pause/pullback is to be expected.
Investor Sentiment: Despite last week's spate of good news on the economic front, our sentiment indicators suggest that investor sentiment remains negative on balance (a good thing). This leads us to believe that hedge funds remain positioned toward the short side.
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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