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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 15, 2010
Current Strategy:
Although stocks are attempting to move a bit higher again today on the back of better-than expected data here in the U.S., and I am impressed that traders have been able to shake off the happenings in Europe, I can't help but feel that the bears are about to get up off of the bench and get back in the game sometime in the very near future. With stocks now very overbought and the momentum waning a bit, this would appear to be a perfect time for our furry friends to take a shot. Bottom Line: We're leaning cautious here.
We would consider being short-term buyers at: A pullback to test 1225-1230 on S&P 500
We would consider being short-term sellers at: A close below 1219
Trend and Momentum Indicators:
Short-Term Trend: As of this writing, the trend is now sideways over the past few days. Therefore, unless the bulls can regain some of their mojo, the bears may take over on downs.
Intermediate-Term Trend: Despite the current pause in the short-term uptrend, the intermediate-term trend remains positive as the indices are above their rising moving averages and either at or near cycle-highs.
Market Internals: No change again today - Both of our short- and intermediate-term TBC models remain at their max-positive levels this morning.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our three momentum models have been taking turns flipping in and out of the neutral zone. Thus, while the indicators are positive this morning, it wouldn't take much for them to tick down. Bottom Line: Momentum appears to be waning.
Support/Resistance Zones for S&P 500:
- Current Support: 1225ish
- Current Resistance: 1250ish
Early Warning Indicators:
Overbought/Oversold Condition: Our indicators are now in overbought territory. As such, the warning flag is flying.
Investor Sentiment: Sentiment remains a little too upbeat and our models are in the extreme optimism zone, which is also a warning. Thus, our "get ready to go the other way" indicators are singing the same song and looking for some attention.
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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