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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 10, 2010
Current Strategy:
Given the headwinds facing the market (the potential for House Dem's to blow up the tax deal and the expectations for China to raise rates), we've got to say that the indices are holding up fairly well again today. However, we will also admit that almost any piece of bad news might send things lower in a hurry. But for now, the bottom line is the trend is your friend.
We'd be Short-term Buyers At: A pullback to test 1220 on S&P 500
We'd be Short-term Sellers At: A close below 1219
Trend and Momentum Indicators:
Short-Term Trend: So far at least, the bulls have been able to just keep on keepin' on. And while stocks are overbought, the bulls continue to hold court.
Intermediate-Term Trend: Sorry for the broken record, but the intermediate-term trend remains positive at this stage.
Market Internals: Ditto from yesterday: Both of our short- and intermediate-term TBC models remain positive this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Of our three shorter-term momentum models, two are max positive and one is still only moderately positive. It is interesting to note that the laggard model is a "thrust" indicator. So, while momentum is solid right now, the "oomph" has been lacking. This tells us that we've likely got a "continuation move" on our hands at this time.
Support/Resistance Zones for S&P 500:
- Current Support: 1220ish
- Current Resistance: 1250ish
Early Warning Indicators:
Overbought/Oversold Condition: Stocks continue to be in overbought territory but the bears have been unable to produce a reason to go the other way.
Investor Sentiment: As we've been saying this week, our sentiment indicators have reached "extreme" levels. This in and of itself is not a bull killer but it is a warning sign.
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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