Shades of Grey

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

Pure technicians don’t care about the economic data, but the market players certainly seemed to this morning as all three reports failed to meet expectations. However, not much has changed from a chart perspective – the indices remain in a trading range that appears to be a consolidation pattern. Conservative traders will want to wait for the range to be resolved before adding meaningful positions. Until then, we are dealing with various shades of grey.

We would consider being short-term buyers at: A close above 1345 area on the S&P 500

We would consider being short-term sellers at: A close below 1320 on the S&P 500

Trend and Momentum Indicators

Short-Term Trend: The short-term trend has improved to neutral. The S&P si now back above its short-term moving averages and both the 5- and 10-day ma’s are moving higher for the time being.

Intermediate-Term Trend: Our best guess is that the current three-week range represents a consolidation phase. Thus, unless the S&P closes below the 1320 and 1300 areas, we’d give the bulls the benefit of any doubt.

Market Internals: Both of our TBC models have upticked to neutral today. These models have done a nice job of defining/confirming the trading environment.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: No change: Our momentum models continue to waffle.

Support/Resistance Zones for S&P 500:

  • Current Support: 1320
  • Current Resistance: 1345ish

Early Warning Indicators

Overbought/Oversold Condition: The S&P is now modestly oversold from a short-term perspective and is dead-neutral from an intermediate-term perspective.

Investor Sentiment: In keeping with the sloppy, trend-less environment, even the sentiment indicators are now approaching neutral readings.

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.