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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: November 1, 2010
Current Strategy:
It is hard to argue with the bullish forces in the market at the present time. However, we can't help but feel that this move is getting long in the tooth as there are negative divergences cropping up in many technical indicators. In addition, the "fade trade" seems to continue to be the game right now as apparently it is safer to just go the other way on an intraday basis than make a bet on the outcome of this week's big events. Finally, as I've been saying this morning, I fear that when the reversal comes, it may be shockingly swift. Thus, we would continue to play the game more conservatively for the time being.
We'd be Short-term Buyers At: A close above 1190 on S&P
We'd be Short-term Sellers At: A close below 1170
Trend and Momentum Indicators:
Short-Term Trend: It is tough to get a read on the short-term trend at the moment due to the "fade trade" mentality right now. So, with all the sideways action over the past seven sessions, we will call the s.t. trend moderately positive.
Intermediate-Term Trend: From an intermediate-term standpoint, the bulls should still receive the benefit of doubt here.
Market Internals: Our short-term TBC model could perk up and join the intermediate-term model in the positive zone once again - but the morning rally will need to hold.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum indicators remain moderately positive and on buy signals.
Support/Resistance Zones for S&P 500:
- Current Support: 1175ish
- Current Resistance: 1190
Early Warning Indicators:
Overbought/Oversold Condition: Our overbought indicators are actually out of sync at the moment as the short- and longer-term indicators are overbought and negative while the intermediate-term indicators are neutral. We will be watching for these to "line up."
Investor Sentiment: Sentiment remains fairly upbeat, particularly in relation to the potential for QE II to jumpstart economic growth. As such, the yellow flag is out.
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: 18 day weighted ma (cyan), 9 day exponential ma (thick orange), 4 day simple ma (broken blue), and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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