The Latest Line in the Sand

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

It looks like the bounce that everyone has been expecting is “on” today. So, the key question now is how far can the bulls run with the ball? There is significant resistance overhead and the S&P is currently struggling with its 150-dma. Assuming the bulls can push through here, the next stop would be 1300. But one has to wonder just how far an oversold condition can take things…

We would consider being short-term buyers at: A close above 1289 area on the S&P 500

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

Trend and Momentum Indicators

Short-Term Trend: Despite this morning’s bounce, the short-term trend remain in a down. However, at least the bulls now have some support to lean against at 1280.

Intermediate-Term Trend: The intermediate-term trend continues to bend, but as of yet, has not broken. We’re continuing to watch our weekly charts for clues as to the intermediate-term trend. A weekly close below 1279 would be a problem. So, it would appear that 1280 is the new line in the sand.

Market Internals: No change so far today: Both of our TBC models remain negative.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: Despite the less than positive readings, the momentum can be viewed as a plus for the bulls at the moment. As we’ve mentioned, these indicators never got overly negative.

Support/Resistance Zones for S&P 500:

  • Current Support: 1280
  • Current Resistance: 1300ish

Early Warning Indicators

Overbought/Oversold Condition: The market remains oversold from both a short- and intermediate-term basis. However, any further gains in prices will impact the short-term readings.

Investor Sentiment: The sentiment picture is improving as the mood of the market becomes more dour. The key here is that as the market mood becomes negative, this suggests that a lot of s.t. selling has already occurred.

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.