The New 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

Acting IMF Director Lipsky’s comments relating to Greek debt (no talk of default) are helping the Euro, which in turn, is helping stocks move higher. However, from a technical perspective, it’s all about the downtrend line that is now obvious to traders (I’ve drawn it in on the S&P chart below). In short, the S&P will need to close comfortably above this line before we can consider upgrading the short-term trend. So, we’re watching the 1340 area with interest.

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 1315 on the S&P 500

Trend and Momentum Indicators

Short-Term Trend: The short-term trend can be upgraded to neutral at this point. But, as we mentioned above, the key is the downtrend line. As long as this line remains intact, traders will sell rallies.

Intermediate-Term Trend: We’ll continue to see the current action as part of a consolidation phase within an intermediate-term uptrend. As long as stocks don’t put in a “lower low,” the trend is still your friend.

Market Internals: Our short-term TBC model moved up to neutral on an improvement in breadth. However, the intermediate-term model remain negative.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: No change in our momentum models today. Two of the three models are “moderately negative” while one remains negative. We will be watching these models closely to see if there is any “oomph” behind the bulls’ efforts today.

Support/Resistance Zones for S&P 500:

  • Current Support: 1320
  • Current Resistance: 1340ish

Early Warning Indicators

Overbought/Oversold Condition: The short-term oversold condition is quickly being worked off. Thus, the market is neutral from both the short- and intermediate-term perspectives.

Investor Sentiment: No change today… The sentiment indicators are now neutral on balance.

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.