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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 27, 2010
Current Strategy:
The much anticipated pullback appears to be at hand. Thus, the question now becomes: How low will it go before the buyers return? (We'll guess the 1160 area.) We also must be on the lookout for traders "selling the news" from the election and the Fed meeting. As such, we'll be watching the internals during the decline and the support zones.
We'd be Short-term Buyers At: A close above 1185 on S&P
We'd be Short-term Sellers At: A close below 1169
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is now neutral as the S&P has broken down through its 10-day moving average. However, with the 5-day still above the 10-day, and both above the rising 25-day, the bulls still get the benefit of the doubt.
Intermediate-Term Trend: The intermediate-term uptrend will remain moderately positive as long as the S&P holds above 1160 and the 10-day ma stays above the 25-day.
Market Internals: Our short-term TBC models will likely downtick today and if the decline picks up steam, both could lose some ground. We'll be looking at this closely tomorrow morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Momentum indicators are relatively slow moving. Therefore, they remain in decent shape at the present time.
Support/Resistance Zones for S&P 500:
- Current Support: 1170ish
- Current Resistance: 1190-1210
Early Warning Indicators:
Overbought/Oversold Condition: Stocks remain VERY overbought from an intermediate-term perspective but the s.t. overbought condition is being worked off with today's decline.
Investor Sentiment: No real change in the sentiment indicators. While the models are not at extreme levels, they do indicate that caution is warranted.
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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