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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 11, 2011
Current Strategy:
From the bull camp's perspective, the good news is the NASDAQ 100 has moved to its highest level in nearly a decade (thank you, Apple) and the NASDAQ Comp is breaking to new cycle-highs this morning. The bad news is that (1) the S&P 500 has not broken out (yet?) and (2) there are gaps on the charts from this morning's open. Emotion aside, you've got to favor the bull camp at the present time. Insisting on stepping in front of this type of move is suicide and those that do so are simply looking for the thrill of "being right." From a cold, money management perspective, we like to stay with the team that is moving the ball.
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 1254
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is now positive on the NASDAQ chart and is improving on the S&P, but still neutral overall. However, the s.t. ma's are threatening to move below the 10-day. This remains something to watch.
Intermediate-Term Trend: Nothing new to report, the intermediate-term trend remains positive.
Market Internals: No change yet today, although the short-term TBC model could uptick if the rally holds today. Our intermediate-term model remains positive.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: While our momentum indicators have moved back into the neutral zone across the board, they remain on buy signals. Thus, if the bulls can reassert themselves and produce a little "oomph" in the process, the uptrend can be upgraded. But for now, the momentum remains a modest concern.
Support/Resistance Zones for S&P 500:
- Current Support: 1260
- Current Resistance: 1280
Early Warning Indicators:
Overbought/Oversold Condition: The overbought condition is back this morning and our indicators are once again waving a yellow flag. However, it does remain positive from the bulls' perspective that the bears have been unable to produce an oversold condition from even a short-term perspective.
Investor Sentiment: Bottom Line: Sentiment remains something to watch. But to review, the key is to wait for sentiment to reach an extreme reading (check) and then reverse before taking action.
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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