McClellan OB/OS Oscillators Split

Indexes Stop At Downtrend Lines And Below Resistance

• On the charts, the DJT (page 3) and MID (page 4) did improve as both managed to close back above their respective 50-DMAs and uptrend lines. However, while volume lifted on the NYSE, OTC volume dipped on the bounce as the SPX, DJI and OTC (pages 2-3) all saw their rallies stall at their short term downtrend lines suggesting the current correction is still intact. As well, none of the indexes managed to climb above their resistance levels listed below. So at this point, the charts have yet to signal a reversal of the current correction.
• Regarding the data, the NYSE McClellan OB/OS one- and 21-day Oscillator levels are still oversold at -74.61 and -59.64 but are well above yesterday’s significant oversold conditions. Meanwhile, the OTC OB/OS levels are back at neutral on both counts at -21.54 and -0.41 showing no oversold condition remains. A good deal of the rest of the data is neutral including the OEX Put/Call Ratio (smart money) at 1.34 and the Equity Put/Call Ratio (contrary indicator) at .63.
• What continues to get our attention is corporate insiders refusing to be motivated into a buying mode as the markets fell. It has stayed at a fairly low 11% throughout the slide suggesting insiders have not found price dips to be compelling enough for purchase. As stated previously, we usually see a spike in “crowd” fear with insiders actively buying at or near correction lows. Neither of those conditions currently exists.
• So in conclusion, although the message is not crystal clear, the weight of the evidence continues to suggest to us that the recent overdue correction in the equity indexes is not yet complete.
• 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 2.17%.

• SPX: 1,598/1,650
• DJI: 14,840/15,300
• OTC: 3,267/3,473
• DJT: 6,113/6,392
• RUT: 950/995