Technical Talk: The Bulls Got the News, Can They Hold On?
February 11, 2011
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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 11, 2011
Current Strategy:
Stocks are moving higher this morning or the report that Egypt's President Hosni Mubarak has finally stepped down. This has pushed the Dow, S&P, Russell, and Midcaps to new 52-week highs. However, a closer look at the charts of the Dow and NASDAQ shows that there is some resistance to deal with, while the clear-cut leader right now remains the Midcap index. While we could easily see this news being greeted with a "game back on" mentality this afternoon, should the bears find a way to push things lower (the phrase "buy the rumor, sell the news comes to mind"), they could seize a key opportunity from a technical perspective. We remain cautiously optimistic in the near-term while recognizing that a pullback could begin at any time.
We would consider being short-term buyers at: A close over 1325 on the S&P 500
We would consider being short-term sellers at: A close below 1298
Trend and Momentum Indicators:
Short-Term Trend: The short-term trend remains a battleground, but appears to be moderately positive as of this writing.
Intermediate-Term Trend: Although we wouldn't be surprised to see a pullback in the near-term, the intermediate-term trend remains positive.
Market Internals: Our TBC models have done a good job informing us that the bulls remain large and in charge right now.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: The Achilles heel of the bulls' run right now is momentum. Just one of our three momentum models are in the max-positive mode, while the other two remain only moderately positive. This leaves the run vulnerable.
Support/Resistance Zones for S&P 500:
- Current Support: 1300ish
- Current Resistance: 1325
Early Warning Indicators:
Overbought/Oversold Condition: Stocks remain overbought. However, as we've been saying, this remains a sign of strength during a trend such as the one we're seeing now.
Investor Sentiment: Our sentiment models remain elevated and continue to remind us that some caution is warranted from a big-picture standpoint. However, since the current market appears to be all about following the crowd, this situation isn't likely to change (until it does).
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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