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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 8, 2011
Current Strategy:
Although the bulls have decided to strut their stuff again lately and it is clear that fund managers are putting money to work on a regular basis, we do have to recognize that some areas of the market are becoming more than a little extended. Therefore, while we continue to ride the bull train, we are keeping an eye out for the next pullback. In terms of near-term strategy, we continue to play the game with a dip-buying approach.
We would consider being short-term buyers at: A Pullback to test 1308-1300 on the S&P 500
We would consider being short-term sellers at: A close below 1298
Trend and Momentum Indicators:
Short-Term Trend: Although there is a modest divergence occurring this morning between the blue chip and the NASDAQ, Russell, and Midcap indices, the bulls continue to have control of the near-term trend at the moment.
Intermediate-Term Trend: The intermediate-term trend remains positive and it would require a close below 1275 to turn the trend.
Market Internals: Our TBC models remain positive this morning and continue to favor the bull camp.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: Two of our three momentum models are max-positive while the third is getting close. Thus, after a brief scare relating to Egypt, it would appear that the bulls continue to have "mo" on their side.
Support/Resistance Zones for S&P 500:
- Current Support: 1300ish
- Current Resistance: There is no important near-term resistance overhead at this time on the S&P 500
Early Warning Indicators:
Overbought/Oversold Condition: Stocks remain overbought. However, we should keep in mind that there is something called a "good overbought" condition, which is an indication of strength. This appears to be the case at the present time.
Investor Sentiment: Our sentiment models remain elevated and continue to suggest that some caution is warranted.
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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Lot of positive drivers in market right now, incl. flow out of emerging market funds, flow out of bond funds, flow in to overall liquidity by QE II, positive leading indicators, positive results in corporate bottom and top lines, etc, etc, etc. so UPWARD TREND SHOULD CONTINUE IMHO.