Short Term Outlook Turns “Neutral/Positive”
Opinion: All of the indexes closed higher Friday with positive internals as volumes grew on both the NYSE and NASDAQ. While no resistance levels were violated, there was enough positive chart action to move our near term outlook from “neutral” to “neutral/positive” as discussed below. The data is largely unavailable this morning. As such, we will focus mainly on the charts.
- All of the indexes closed higher Friday with good breadth and volume characteristics. Several closed near their highs of the day. While no resistance levels were violated, some encouraging signs came in the following fashion. Both the NASADQ (page 3) and RUT (page 4) closed above their short term downtrend lines that had been in force for the past 4 weeks. The DJT (page 3) and MID (page 4) also closed above their short term downtrend lines but only marginally so. We would like to see a wider margin to fully embrace their signals. Yet a bullish violation was registered for both. The MID also closed above its 50 DMA. As well, all of the indexes are now on bullish stochastic crossover signals, adding a bit more encouragement to the near term outlook. The violations of the downtrends are our primary reason for becoming a bit more enthusiastic. Violations of resistance are still needed in order to generate a more positive tone.
- The bulk of the data is unavailable this morning with the exception of the WST Ratio and its Composite. Both are neutral at 48.4 and 129.0 respectively.
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- In conclusion, the violations of the short term downtrends in combination with the stochastic readings offer enough technical encouragement to change our outlook from near term “neutral” to near term “neutral/positive”.
- The intermediate term still needs to see a more notable improvement in breadth. As such, that outlook remains “neutral”.
- Forward 12 month earnings estimates for the SPX from IBES of $124.35 leave a 6.06% forward earnings yield on a 16.5 forward multiple.
SPX: 2,039/2,083
DJI: 17,245/17,761
COMPQX; 4,710/4,832
DJT: 7,433/7,662
MID: 1,423/1,469
RUT: 1,094/1,129
VALUA: 4,447/4,559