NYSE 1 Day McClellan OB/OS Overbought
Opinion: All of the indexes closed higher yesterday with strong breadth as volumes rose on the NYSE but declined slightly on the NASDAQ. All closed at or near their intraday highs. A number of positive events took place on the charts as some resistance levels and downtrend lines were violated. However, the data is now sending some signals suggesting a pause in the recent advances. As such, our near term outlook is now more neutral in nature while the intermediate term, although a bit more encouraging, remains neutral as well.
- On the charts, all of the indexes saw gains with positive breadth and volume while closing near their highs of the day. Bullish chart signals came in the form of the SPX (page 2) and DJI (page 2) both closing above resistance and their downtrend lines. The MID (Page 4) closed above resistance as well but has yet to reverse its downtrend. The COMPQX (page 3) tested resistance while the DJT (Page 3) closed on its current resistance level. The large caps were the drivers of the day. None of the stochastic levels are overbought yet while the NYSE A/D closed back above its 50 DMA and is close to reversing its downtrend, helping the intermediate term requirement of improving breadth. However, the NASDAQ A/D remains below its 50 DMA and downtrend line.
- We believe the data is now suggesting a pause from the recent rally as the NYSE 1 day McClellan OB/OS is overbought at +86.96 and the NASDAQ is mildly overbought at +50.59. These are not “dangerous” numbers but do suggest a good bit of the short term fuel has been spent. The 21 day levels are neutral. The WST Ratio and its Composite are cautionary as well at 78.9 and 184.5. The OEX Put/Call Ratio is neutral at 1.08 while the Gambill Insider Buy/Sell Ratio is bullish at 30.2 as insiders continue to buy up their shares while the leveraged ETF traders measured by the Rydex Ratio (contrary indicator) remain disbelievers in the rally at a neutral 28.0. We view the lack of enthusiasm displayed by the Rydex as encouraging.
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- In conclusion, the data is suggesting a slowing or some possible retracement of the rally over the near term while the NSADQ A/D has yet to join the NYSE in reversing its downtrend, thus leaving the intermediate term in neutral.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 6.35% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $126.11 versus the 10 Year Treasury yield of 2.06%.
SPX: 1.930/1,989
DJI: 16,302/16,925
COMPQX; 4,552/4,783
DJT: 7,665/8,058
MID: 1,350/1,426
RUT: 1,083/1,148