Data Turning More Short-Term Positive But Charts Don’t
Opinion
Opinion
Friday’s drop on lighter volume has pushed some of the data into more positive territory for the short term, suggesting a bounce. However, the charts have yet to reverse their respective short term downtrends or violate upside resistance. Thus our interpretation that the indexes may see yet another bounce to resistance that, in our opinion, has the higher probability of not being broken.
- Looking at the data, there are a number of points suggesting the markets should see some lift starting with the McClellan OB/OS Oscillators, three of which are in oversold territory. The NYSE one- and 21-days are oversold at -71.83 and -64.88 respectively with the OTC 1 day oversold as well at -54.22. Only the OTC 21-day is neutral at -17.02.
- The WST Ratio is bullish at 29.9 while the Equity Put/Call Ratio (contrary indicator) is heavy puts at .73. As a whole, they suggest some upside bias for the short term. Yet, we continue to see a lack of insider buying interest measured by the Gambill Insider Buy/Sell ratio that remains frozen at a relatively low 11% as of 6/12.
- On the charts, Friday’s decline was on fairly light volume. Yet none of the charts are showing bullish reversals at this point. The SPX, DJI and OTC (pages 2-3) all remain below their short term downtrend lines from their 5/28 intraday highs while the DJI (page 2) closed below its uptrend line from last November’s lows for the second time in one week.
- We would also note the DJT (page 3) rallied to but failed to surpass its short term resistance Friday and closed near its low of the day. The DJT has been trading a bit better than the other indexes of late which is worth monitoring as it was the first of the indexes to stumble. So, thus far, none of the indexes have actually signaled a change in the short term downtrend at this point in time.
- In conclusion, we suspect the net message of the data and charts is one suggesting some short term lift that may test resistance but fail to debunk the current short term market correction.
- For the longer term, we remain bullish on equities as they remain undervalued with a 7.1% forward earnings yield versus the 10-Year Treasury yield of 2.13%.
- SPX: 1,598/1,650
- DJI: 14,840/15,300
- OTC: 3,267/3,473
- DJT: 6,113/6,392
- RUT: 950/995
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