Chalk Talk: Resistance Looms

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: July 2

Our Current Take:

Although stocks did enjoy an impressive blast higher Friday, the bottom line is that there is a fair amount of resistance overhead. So, given that (a) it's a holiday shortened week in the U.S., (b) the ECB and BOE are both meeting this week, (c) a pullback to test support is to be expected, (d) many believe that Friday's move was overdone, and (e) the recent economic data has been less than stellar, we wouldn't be surprised to see a bit of a tussle between the two teams over the next few days.

We would consider being short-term buyers at: A successful test of 1340 support or a close over 1363

We would consider being short-term sellers: A close below 1330

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 now positive as price is above our 5- and 10-day ma's and the 5-day is above the 10-day.

Intermediate-Term Trend: The intermediate-term trend is moderately positive at this time. We would need to see our custom 10-week ma cross back above the 27-week in order to upgrade the trend rating to positive.

Market Internals: Both the short- and intermediate-term TBC models are positive today.

  • TBC = Trend-and-Breadth-Confirm Model

Market Momentum: Two of our three momentum thrust models have had given us buy signals in the last two weeks and both remain positive this morning. The third model is neutral.

Support/Resistance Zones for S&P 500:

  • Current Support: 1335
  • Current Resistance: 1365

Early Warning Indicators:

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

Investor Sentiment: The majority of our sentiment indicators are neutral at the present time. Thus, neither team has an edge from a sentiment perspective.