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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: December 2, 2010
Current Strategy:
Just three days ago, the bulls were staring at an almost certain breakdown in prices, which, according to the "fast money" types, would surely lead to the market selling down to 1150. However, with the major indices now sitting at or near their highs for this market cycle, the bulls are staring at a new kind of line in the sand - resistance on the Dow, S&P, and NASDAQ. The good news is that with the Midcaps and Russell 2000 having already broken out to new high ground and displaying leadership, the other indices are likely to follow suit at some point.
We'd be Short-term Buyers At: A pullback to test 1200 or a break over 1226 on S&P 500
We'd be Short-term Sellers At: A close below 1200
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is now quite positive and pullbacks should be bought.
Intermediate-Term Trend: Since there is some resistance overhead, the intermediate-term trend rating remains only moderately positive. And we wouldn't be surprised to see a pullback if the resistance holds. But, assuming the dip buyers continue to materialize, it appears that the year-end rally is underway.
Market Internals: Our TBC models are both positive this morning - a plus for the bull camp.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models have improved but could gain some additional ground if the current rally holds.
Support/Resistance Zones for S&P 500:
- Current Support: 1200
- Current Resistance: 1225
Early Warning Indicators:
Overbought/Oversold Condition: Stocks have quickly become overbought from a short-term standpoint but remain neutral from an intermediate-term point of view.
Investor Sentiment: Our sentiment indicators show that the mood remains a little too optimistic. However, this type of condition can remain intact for quite some time.
Chart Watch:
S&P 500 Last 12 Months
S&P 500 Last 5 Years
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