Running with the Bulls

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

Today, stocks are climbing higher for a fifth straight session. Better than expected ISM Manufacturing data for the month of June has been the focus this morning, as the bulls have pushed major indices well above their 50-day moving averages. With a Greek default off the table and positive U.S. economic data coming in, it looks like we will finish the week on all up-days heading into the long holiday weekend. That being said, stocks can be expected to hiccup at least a little bit early next week, as we have gained over 5% in just 6 trading days.

1260 is now the intermediate-term support. The S&P 500 broke key resistance at 1320 this morning, so with a close above that level, 1320 becomes the new short-term support. The next key resistance overhead looms around 1345-1350 area. We will see if the bulls have a strong enough resolve to push the S&P 500 that high next week.

We would consider being short-term buyers at: A pullback to 1300 or a break above 1350 on the S&P 500

We would consider being short-term sellers at: A close below 1298 (150dma) on the S&P 500

Trend and Momentum Indicators

Short-Term Trend: Stocks have rallied for five straight sessions, from what was nearly the low of the year up above indices’ 50-day moving averages. Thus, we rate the short- term trend positive.

Intermediate-Term Trend: With some convincing action back above 1320, the intermediate term trend is not negative anymore. While the short term direction is straight up, we really haven’t made any progress from our price levels in February. Thus, we rate the intermediate term trend neutral.

Market Internals: Our TBC models give us a positive rating today.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: Given the heavy upward thrust this week, our momentum models have been pushed from neutral up to positive.

Support/Resistance Zones for S&P 500:

  • Current Support: 1300
  • Current Resistance: 1320-1325

Early Warning Indicators

Overbought/Oversold Condition: While we are overbought in the short term, we are still slightly oversold in the intermediate term.

Investor Sentiment: Sentiment is moderately negative, which favors the bulls. In essence, this means that those who wanted to sell have likely done so.

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: 150 day weighted ma (light orange), 50 day weighted ma (purple), 18 day weithged ma (cyan), 10 day weighted ma offset by 2 days (orange), 5 day weighted ma offset 2 periods (dashed blue) and stochastic %K using 14 and %D.