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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 24, 2011
Current Strategy:
The shorts appear to be running for cover this morning as the dip-buying is back. From a technical standpoint, things look pretty darn good on the charts of the DJIA and S&P. However, the charts of the NASDAQ, Russell, and Midcaps are a different story altogether. The bottom line appears to be that as long as the Dow can continue to attract buyers, the technical picture should continue to favor the bulls. But, a breakdown on the broader market indices would spell trouble.
We would consider being short-term buyers at: A close over 1296 on the S&P 500
We would consider being short-term sellers at: A close below 1278
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is currently neutral but appears to be trying to turn green once again.
Intermediate-Term Trend: With prices above the short-term moving averages and the short-term moving averages above the intermediate-term ma's, it is hard to get overly negative here.
Market Internals: While our intermediate-term model remains positive, the short-term model is playing the flip-flop game again today. Should the rally hold, the model will likely move back to the buy side. This is how things work during a consolidation.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models have been losing ground lately and are now high-neutral on balance. This indicates that the internals are weakening and the bulls will need to produce some oomph if a rally resumption is going to stick.
Support/Resistance Zones for S&P 500:
- Current Support: 1278
- Current Resistance: 1296
Early Warning Indicators:
Overbought/Oversold Condition: Stocks never became oversold over the past three sessions and are quickly moving back toward overbought.
Investor Sentiment: Our sentiment indicators are slow-movers and remain at extremely high levels. This continues to be a yellow flag and a reason to exhibit some caution at the present time.
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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