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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 12, 2011
Current Strategy:
So much for the January script! The fact that the ECB came up with a creative way to avoid debt contagion is being celebrated in the markets. All the major indices are currently sitting at new highs for this bull cycle and the NASDAQ 100 is at its highest level in a decade. As such, we've got to say that the bulls have the ball and it is their game to lose today. Yes, stocks are extended. But the bears will now need a catalyst in order to change the complexion of the game.
We would consider being short-term buyers at: A pullback to test 1260ish or a close over 1280 on S&P 500
We would consider being short-term sellers at: A close below 1259
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is now solidly positive once again.
Intermediate-Term Trend: Not surprisingly, the intermediate-term trend remains quite positive.
Market Internals: As expected, our short-term TBC model upticked to positive. Thus, both of the TBC are in "go" mode where the market has gained ground historically at a rate of more than 30% per year.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: As we've mentioned, our momentum indicators are end-of-day oriented. Thus, it will be interesting to see if the bulls can create some "oomph" on a closing basis. This will be THE most important thing to watch in the near-term.
Support/Resistance Zones for S&P 500:
- Current Support: 1278
- Current Resistance: 1325
Early Warning Indicators:
Overbought/Oversold Condition: After working off an overbought condition for a very short time, stocks are quickly returning to overbought territory. However, at this stage of the game we will likely need to see long-term indicators flash warning signs before the bears can reenter in any meaningful way.
Investor Sentiment: Believe it or not, some of our sentiment indicators (we follow 8 different models) actually improved a bit recently. However, sentiment remains overly upbeat. And at this stage we will be looking for our indicators to reach extreme levels (check) and then reverse lower - THIS is when the bears may be able to get back in the game.
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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