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: August 12, 2009

The Trend and Momentum Indicators:

Short-Term Trend: Yesterday's decline was modestly negative but not a deal-breaker for the short-term trend. While our weighted stma was violated to the downside, the lows of the recent consolidation - while fragile - did hold up. We would turn negative from a short-term perspective on a close below 989.

Intermediate-Term Trend: The current consolidation, especially on the NASDAQ, has caused us to downgrade the intermediate-term trend - but just by one notch. We still view the trend as moderately positive and would require a break of the 968 are to downgrade further.

Market Internals: As expected, our "hair trigger" trend-and-breadth-confirm model flipped to neutral yesterday. However, there has not been enough damage to downgrade the internals beyond moderately positive.

Market Momentum: Momentum has been the achilles heel of this move as we haven't seen the "oomph" we'd like. But whining aside, the momentum is still strong enough to keep the bulls alive here.

The Early Warning Indicators:

Overbought/Oversold Condition: The short-term overbought condition is being worked off via the minor pullback and the passage of time. This has allowed us to upgrade the reading one notch to moderately negative from negative.

Investor Sentiment: No change here... The optimism in our sentiment indicators remains strong and continues to grow. As we've mentioned, we're looking for these indicators to reach an extreme position (check) and then to reverse, which would be a sell signal worth acting on from an intermediate-term basis.

Current Strategy:

It would appear that after yesterday's 1% pullback, the dip buyers have wasted no time in getting back to work. And for now at least, this morning's rally has given the bulls some breathing room. In terms of short-term strategy, we're watching for a potential retest of yesterday's low... a successful test would be a reason to buy, while a breakdown would cause us to take profits.

We're Short-term Buyers At: A successful test of 992 on S&P

We'd be Short-term Sellers at (or near): A close below 989 on S&P

S&P 500:

NASDAQ Composite

The indicators we have displayed on the chart above include: 50 day exponential ma (purple), 25 day exponential ma (cyan), 10 day weighted ma offset by 2 days (orange), standard deviation bands using 1.9 std dev of 21 day and stochastic %K using 14 and %D.

   S&P 500 Intraday

   S&P 500 Last 3 months

   S&P 500 Last 6 months

   S&P 500 Last 12 months

 

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