Technical Talk: The Trend is Your Friend (Until It Isn't)
October 21, 2010
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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 21, 2010
Current Strategy:
With the Dow having played a quick game of tag with its April high, the selling that ensued isn't terribly surprising. Remember, this remains a "buy the rumor, sell the fact" type of environment. As such, everyone who has bought on the expectation of QE II will need to find an exit point. And since the announcement on November 3rd might be a little too obvious, there are probably a fair amount of people trying to get ahead of the game. Therefore, we would not be surprised to see some resistance develop here. Bottom Line: The trend is your friend (until it isn't).
We'd be Short-term Buyers At: A close above 1185 on S&P
We'd be Short-term Sellers At: A close below 1159
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is positive as the indices are back above their s.t. ma's and the ma's themselves are movin' on up.
Intermediate-Term Trend: The intermediate-term uptrend continues. 'Nuff said.
Market Internals: As expected, both of our TBC models are positive territory. This is always a prerequisite for a healthy rally.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Despite the volatility this week, there hasn't been much change in our momentum models. These indicators continue to favor the bulls.
Support/Resistance Zones for S&P 500:
- Current Support: 1160ish
- Current Resistance: 1185ish
Early Warning Indicators:
Overbought/Oversold Condition: Nothing new to report: Stocks remain overbought and extended and the yellow flag is still flying.
Investor Sentiment: Our sentiment indicators remain negative on balance but not dramatically so.
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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