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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 9, 2010
Current Strategy:
It would appear that the broad market, while modestly higher this morning, may be ready to enter a consolidation phase as the current little rally try appears to be tiring. This would fit with the seasonal pattern as things tend to get a little sloppy prior to the traditional year-end window dressing. But at this stage, the trend is your friend and the trend is up. But... we'd be cautious with any new buying at the present time given the extended condition of the trend.
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 1214
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is looking a little tired at the moment as the programs tied to the dollar appear to be making things difficult for the bulls this morning.
Intermediate-Term Trend: Although things are getting a little sloppy, the intermediate-term trend is up.
Market Internals: Both of our short- and intermediate-term TBC models remain positive this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models have actually perked up a bit this morning. And while they are intermediate-term in nature, this is a positive sign.
Support/Resistance Zones for S&P 500:
- Current Support: 1220ish
- Current Resistance: 1250ish
Early Warning Indicators:
Overbought/Oversold Condition: Stocks remain overbought. Thus, the bears simply need a reason to get things moving their way.
Investor Sentiment: The sentiment indicators are now reaching extreme levels. While this condition can remain in effect for some time, we'll be on the lookout for a reversal in sentiment to indicate that the trend is about to change.
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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