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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 22, 2010
Current Strategy:
With the continued earnings flow, no economic data to deal with, and the recent Fedspeak throwing some questions into the QE II debate, it is not surprising to see a mixed tape today. However, this is not necessarily a bad thing. Given that the current rally has been impressive, we could easily see a rally continuation at some point soon. However, in order for such a move to be considered valid, it must be accompanied by strong breadth and volume. Otherwise, we should stay alert for the possibility of a "breakout fakeout." Bottom Line: We're staying cautious here.
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 has weakened due to the development of some overhead resistance. The resistance is clearly not insurmountable, but it is something to watch.
Intermediate-Term Trend: The intermediate-term uptrend continues to be solid. However, if this waffling goes on for much longer, we will have to downgrade the trend a notch or two.
Market Internals: The good news for the bull camp is both of our TBC models are in positive territory.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum indicators haven't budged and continue to favor the bulls.
Support/Resistance Zones for S&P 500:
- Current Support: 1160ish
- Current Resistance: 1185ish
Early Warning Indicators:
Overbought/Oversold Condition: Although stocks remain overbought and extended (and yes, the yellow flag is still flying) it is interesting to note that a couple of our indicators are only neutral at the moment. This is perhaps something for the bulls to hang their hats on.
Investor Sentiment: Our sentiment indicators remain moderately negative on balance. However, these indicators are not at bull-killing levels.
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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