Is the Tail Wagging the Dog?

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.

Our Current Take

While we continue to believe that the programs tied to the dollar are in control of the game, it is worth noting that important support levels are being tested this morning. Thus, it will be important to watch the action closely today in order to confirm whether or not the support levels in the stock market are the tail being wagged by the dollar’s dog or vice versa.

We would consider being short-term buyers at: A close above 1340 area on the S&P 500

We would consider being short-term sellers at: A close below 1330 on the S&P 500

Trend and Momentum Indicators

Short-Term Trend: The short-term trend has weakened a little more this morning. However, given that there is near-term support, the bulls still have a chance.

Intermediate-Term Trend: No change today. The intermediate-term trend remains “moderately positive.”

Market Internals: The internals have held up fairly well during this sloppy period. However, should the indices commence on a new leg down, the models are likely to weaken.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: Our momentum models are beginning to show some signs of wear. And while they remain neutral, we will continue to watch this area with great interest.

Support/Resistance Zones for S&P 500:

  • Current Support: 1330
  • Current Resistance: 1340-1350

Early Warning Indicators

Overbought/Oversold Condition: The S&P is rapidly becoming oversold from a near-term perspective. However, the opposite is true when looking at the intermediate-term picture. Remember, the best moves (in both directions) occur when these oscillators are aligned.

Investor Sentiment: The sentiment indicators continue to waffle in moderately negative territory.

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.