Chalk Talk: Tough To Be a Technician Right Now

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 21

Our Current Take:

I know I've been beating on this theme lately, but if you can remove the headlines, rumors, and news flow, the game is pretty straightforward at this time from a purely technical perspective. If you can forget Goldman Sach's email to clients telling them to short the market and if you can ignore the fact that Germany is looking to delay the approval of the ESM and Fiscal Pact, then the charts tell you that we've got a pullback within an uptrend at the present time. But, of course, if you can't separate yourself from the instant reaction to headlines, then it gets tough to simply buy the dip here. And that is exactly what a trend-following technician that ignores the "noise" from the press would/should do - with a tight stop, of course.

We would consider being short-term buyers at: A successful test of 1340 support (happening now)

We would consider being short-term sellers: A close below 1339

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: We appear to be seeing a pause in the short-term uptrend. But with our custom 5-day above the 10-day, which is above the 18-day, which is above the (well you get the idea), the short-term trend remains moderately positive.

Intermediate-Term Trend: We will call the intermediate-term trend ever-so moderately positive. However, a move back below 1330 will put us back to neutral.

Market Internals: Our s.t TBC model is positive at the moment while our i.t. TBC model has upticked to neutral. A quick flip-flop here would be disappointing for the bulls.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: All three of our momentum thrust models have moved to buy signals. This tells us to give the bulls the benefit of any doubt here and to buy the dip (with a tight stop, of course).

Support/Resistance Zones for S&P 500:

  • Current Support: 1335
  • Current Resistance: 1360

Early Warning Indicators:

Overbought/Oversold Condition: Stocks remain overbought from a short- and intermediate-term perspective, and are approaching neutral from longer-term perspective.

Investor Sentiment: Our sentiment models have pulled back a fair amount and are now neutral on balance. Recall that the extreme negative readings were helpful in getting the current rally phase started. But now that positive has been worked off.