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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 8, 2010
Current Strategy:
The current technical picture varies by index. For example, it could be argued that charts of the Dow and S&P are developing a double-top formation, which, of course, isn't good. However, the NASDAQ, Russell 2000, and Midcap Indices would appear to merely be pulling back (and only a smidge at that) within an uptrend, which, of course, is perfectly acceptable. While we can see both sides of the argument here and we do recognize that the rise in rates would not be a good thing if it were to continue, we're going to suggest that the "message" from the leaders should be followed at this stage of the game.
We'd be Short-term Buyers At: A pullback to test 1220 - 1210 on S&P 500
We'd be Short-term Sellers At: A close below 1205
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend of the S&P has to be downgraded to only moderately positive at the present time. However, the trend of the leaders remains quite positive.
Intermediate-Term Trend: Ditto from yesterday: The intermediate-term trend indicators remain positive on balance and the overall trend is up.
Market Internals: Although both of our short- and intermediate-term TBC models are positive this morning, further weakness could impact our hair-trigger, shorter-term model.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Despite the sloppy action over the last 24 hours, there is no change in our momentum models.
Support/Resistance Zones for S&P 500:
- Current Support: 1220ish
- Current Resistance: 1250ish
Early Warning Indicators:
Overbought/Oversold Condition: The overbought condition remains a concern. However, we need to keep in mind that the bears will likely need a catalyst to get something going.
Investor Sentiment: The sentiment indicators show that optimism continues to build. So, as we mentioned yesterday, these indicators continue to wave a yellow flag.
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 weighted ma (purple), 18 day weithged ma (cyan), 10 day weighted ma offset by 2 days (orange), 4 day weighted ma offset 2 periods (dashed blue) and stochastic %K using 14 and %D.
S&P 500:
NASDAQ Composite
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