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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: January 10, 2011
Current Strategy:
Although the worries about a debt contagion developing in Europe are real, so far at least, there have been no violations of important technical levels on the charts. So, while I am fairly confident that we have not seen the last of the bears this week, so far, so good - at least from a chart standpoint.
We would consider being short-term buyers at: A pullback to test 1260ish or a break over 1280 on S&P 500
We would consider being short-term sellers at: A close below 1249
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is now neutral. But the pullback has been orderly so far.
Intermediate-Term Trend: While the short-term trend is now sloppy, the intermediate-term uptrend remains intact.
Market Internals: No change here... Our short-term TBC model is neutral overnight but our intermediate-term model is positive. This fits with a consolidation phase.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: As we said on Friday, our momentum indicators have been warning of a consolidation phase for the past couple of weeks. So, with the bears trying once again to get something going, we will be watching to see if there is any oomph behind the moves down.
Support/Resistance Zones for S&P 500:
- Current Support: 1257-1260
- Current Resistance: 1280ish
Early Warning Indicators:
Overbought/Oversold Condition: The overbought condition is slowly being worked off and our models are now no worse than moderately negative. Recall that the market has been unable to move to an oversold condition since late November.
Investor Sentiment: We are starting to see some of the froth come out of the sentiment indicators. Traders remain complacent for sure, but the models are not as bad as they were.
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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