Chalk Talk: The Charts Make It Clear

By David Moenning

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.

Chalk Talk: June 19

Our Current Take:

Once again, if you can simply ignore the news flow and all the macro fear/drama, the game is pretty straightforward right now. From a technical perspective, the stock market has broken out of a small head-and-shoulders bottom formation and appears to have entered an uptrend. There is resistance just overhead to contend with however. Oh, and there is a little gathering at Bernanke's office tomorrow.

We would consider being short-term buyers at: A pullback to test 1340 support

We would consider being short-term sellers: A close below 1325

S&P 500: Intermediate-Term View

The indicators we display on the charts below include: 5 day weighted ma moved forward two days (blue dash), 10 day weighted ma offset by 2 days (orange), 18 day weighted ma (cyan), 25-day simple (green dashed) and stochastic %K using 14 and %D.

 

Trend and Momentum Indicators:

Short-Term Trend: The short-term trend has turned positive this morning.

Intermediate-Term Trend: Assuming the market is able to close here, we would upgrade the intermediate-term trend to moderately positive.

Market Internals: There is finally some improvement to report in TBC model. The s.t model is now positive while our i.t. TBC model has upticked to neutral. This is a good first step if you are a bull.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: We are also starting to see some improvement in our momentum models. Our price thrust indicator is now neutral and both our advance/decline and volume thrust indicators have moved up into the positive zones. Again, this is a plus for the bulls.

Support/Resistance Zones for S&P 500:

  • Current Support: 1335
  • Current Resistance: 1360

Early Warning Indicators:

Overbought/Oversold Condition: Stocks are now overbought from a short- and intermediate-term perspective, but remain moderately oversold from longer-term perspective.

Investor Sentiment: There has been no meaningful change in our investor sentiment models since our last report. The indicators continue to favor the bulls at this time.