Short-Term Opinion Remains “Neutral”
Opinion
All of the indexes closed higher again yesterday with positive internals as all posted new closing highs. Volumes rose on the NASDAQ and declined on the NYSE from the prior session. All of the charts remain in uptrends with no sell signals. However, the data continues its cautionary message and has increased in its intensity. With the charts and data sending opposite and equally intense projections, the risk of a correction has increased but sell signals have yet to appear. Thus we continue our “neutral” short term expectations for the major indexes.
- On the charts all of the indexes posted new closing highs yesterday with positive internals and respectable volumes. Market breadth continued to strengthen. As extended as the charts are, they have yet to yield any sell signals. As such their trends remain positive, implying higher prices. However, as noted yesterday, all of the indexes are now trading well above their 50 DMAs that are a cause of some concern. Such extensions are usually resolved either by a longer sideways move, allowing the 50 DMA to catch up with price, or price declines to the 50 DMA. So in spite of the positive trends, there is risk of some sideways to negative action going forward. Sell signals that have yet to appear are needed to sound the alarm.
- The data is sending a cautionary message equal to the positive ones from the charts. All of the McClellan OB/OS Oscillators remain overbought (all Exchange:82.88/84.5 NYSE:+93.23/+82.85 NASDAQ:+79.0/+97.5) while the WST Ratio/Composite is now on a “bear alert” signal at 83.3/184.0. Investor sentiment (contrary indicator) has completely reversed course from their extreme concern at the markets recent lows to being almost devoid of any concern, bordering on euphoria. The new Investors Intelligence Bear/Bull Ratio (contrary indicator) has bears swamping bulls at 19.6/58.8 while the Equity Put/Call Ratio (contrary indicator) finds the crowd very long calls at 0.50. The Gambill Insider Buy/Sell Ratio, although neutral, still finds insiders hard pressed to be buyers of their shares at current levels at 9.4. As such, we cannot shake the feeling from our past experience that when sentiment and the OB/OS levels move to current extremes, the markets become vulnerable to sudden and swift corrections to bring things back in line.
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- In conclusion, as disconcerting as the data has become, and as extended as the carts are, the lack of any sells signals on the charts requires a “neutral” opinion for near term market expectations.