The Basing Phase

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

With the news flow out of Europe seemingly improving, we’re going to stick with our view that what we’re at the present time is the bottoming/basing phase. And while this process can be choppy, unless we see the 1260 level taken out, one can probably trade the long side for the time being. However, let’s keep in mind that the market remains a slave to the news.

We would consider being short-term buyers at: A close above 1280 on the S&P 500

We would consider being short-term sellers at: A close below 1260 on the S&P 500

Trend and Momentum Indicators

Short-Term Trend: Although stocks are higher this morning, the move doesn’t do too terribly much to improve the near-term picture. We’ll be generous and call the short-term trend neutral at the present time.

Intermediate-Term Trend: No change today in the intermediate-term trend. We continue to rate the trend moderately negative due to the lower low put in last week on the weekly charts. We would need to see a move back above 1300 before considering an upgrade.

Market Internals: Both of our TBC models remain negative again this morning. The short-term model could improve if the bulls can get their act together today. But…

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: No Change today as our momentum models remain negative this morning.

Support/Resistance Zones for S&P 500:

  • Current Support: 1261
  • Current Resistance: 1280-1300

Early Warning Indicators

Overbought/Oversold Condition: Nothing really new to report this morning. The market remains oversold from both a short- and intermediate-term basis. And while this will eventually be a positive, the bulls must find a catalyst first.

Investor Sentiment: Sentiment is now negative enough to favor 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: 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.