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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: June 23, 2010

Current Strategy:

It's definitely a tough market to deal with at the present time as there are lots of crosscurrents and even more volatility. Thus, it is probably best to "play small" and avoid taking big risks. We don't really care for the technical action here as both the important ma's and support zones have given way on the S&P. Thus, it appears that we will now have to suffer through another period of searching for a bottom. Unless, of course, the HFT boys simply blast things higher this afternoon :-)

We'd be Short-term Buyers At: A close above 1105 on S&P 500

We'd be Short-term Sellers At: Close below 1088

Trend and Momentum Indicators:

Short-Term Trend: The short-term trend is now down. Is it too late to sell? Hard to answer that one, but our bet is that traders may continue to sell into rallies. Stay alert for any change in this strategy.

Intermediate-Term Trend: If the S&P closes below our weighted 25-day ma, we will downgrade the intermediate-term trend from neutral to moderately negative.

Market Internals: Our short-term TBC model went negative with yesterday's action and our intermediate-term moved down to neutral. Recall that during the strong rally seen in Feb - April, the TBC models held up during any and all pullbacks.

• TBC = Trend-and-Breadth-Confirm Model

Market Momentum: Even our momentum models, which are generally fairly stubborn, are starting to fade a bit here.

Support/Resistance Zones for S&P 500:


• Current Support: 1088
  
• Current Resistance: 1105

Early Warning Indicators:

Overbought/Oversold Condition: Although stocks have been moving lower, the market is not yet oversold on a short-term basis.

Investor Sentiment: Our sentiment indicators have given up some ground as traders became a little more optimistic after the two-week rally. However, there is still enough pessimism in the air to keep the indicators moderately positive.

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 simple ma (purple), 25 day weighted ma (cyan), 10 day exponential ma (thick orange), 200 day simple ma (thin orange), standard deviation bands using 1.9 std dev of 21 day and stochastic %K using 14 and %D.

S&P 500:

NASDAQ Composite

 

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