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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: February 1, 2011
Current Strategy:
Worries? What worries? With the ISM reports showing improvement in the economies of the US and Europe, the Egypt situation has been relegated to the back burner today and it appears that we've suddenly, and without warning, returned to the "It's all good" market that we had up until last Friday. From a technical perspective, there are two points to make. First, the big, round numbers are back. And second, there are gaps on many of the charts from today's open. So, will the bulls be able to just bust on through to the other side after a one-day encounter with the computer sell programs? Stay tuned...
We would consider being short-term buyers at: A close over 1303 on the S&P 500
We would consider being short-term sellers at: A close below 1276
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend is back to being a one-way street as the S&P is currently breaking out to new highs.
Intermediate-Term Trend: If the bulls can hang on the intermediate-term trend will return to a max-positive reading.
Market Internals: Our TBC models are based on closing prices. As such, we won't know until tomorrow if either or both models will return to the buy side. But assuming the bulls continue to hold court, the answer is likely to be yes.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Our momentum models are not easily swayed by a good or bad day here and there. Thus, the bulls will have to provide some "oomph" in order to move the needle of these indicators. So far at least, we'll have to say the bulls are heading in the right direction.
Support/Resistance Zones for S&P 500:
- Current Support: 1276
- Current Resistance: 1303
Early Warning Indicators:
Overbought/Oversold Condition: The overbought condition is back for most of our indicators. It is also worth noting that the bears were unable to produce an oversold reading from even the short-term perspective.
Investor Sentiment: Several of our sentiment indicators are updated on Wednesday's. Thus, it will be interesting to see if the overly optimistic mood has returned.
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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