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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: October 18, 2010
Current Strategy:
Although the blue chips are higher this morning, it is interesting to note that the NASDAQ is not following suit. However, tech has enjoyed a stellar run of late, so I guess we shouldn't jump off the bandwagon just yet. Bottom line: Stocks are overbought and due for a pullback. But with some big reports and the Fed announcement in the wings, the bears may be stuck on the bench for a while longer.
We'd be Short-term Buyers At: A Pullback to test 1165ish on S&P
We'd be Short-term Sellers At: A close below 1155
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend appears to have stalled a bit here. However, it wouldn't take much to put the bulls back in charge.
Intermediate-Term Trend: The intermediate-term uptrend has been impressive and is still intact.
Market Internals: Our TBC models both remain positive this morning. However, any weakness would flip our short-term model to neutral. But so far at least, this has not been a problem.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models remain strong this morning.
Support/Resistance Zones for S&P 500:
- Current Support: 1160ish
- Current Resistance: 1180ish
Early Warning Indicators:
Overbought/Oversold Condition: As we have said, the overbought condition is currently considered a "good" overbought. However, the fact that the market has been unable to move from an overbought condition for such a long period of time does raise some eyebrows. In other words, a pullback is likely.
Investor Sentiment: Our sentiment indicators are negative on balance at the present time. This tells us risk is rising.
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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