More Bearish Stochastic Crossovers Triggered
Opinion
The bulk of the indexes closed lower Friday with the one exception of the DJT. Internals were negative on the NYSE and mixed on the NASDAQ as volumes rose notably on both exchanges due to options expiration. No support levels or trends were violated on the charts although two more warning signals were registered. The data remains mixed. We are maintaining our “neutral” near term outlook for the major equity indexes as the current trends are mostly positive but other issues discussed below suggest some degree of risk is increasing.
- On the charts, all of the indexes closed lower Friday with the exception of the DJT (page 4). Internals were generally negative. All managed to close near their intraday highs but the DJI (page 2) and MID (page 4) both registered “bearish stochastic crossover signals” implying an increased potential for some retracement. The DJT gave the same signal last Thursday. The rest of the indexes find their stochastic levels remaining well into overbought territory. No trend lines or support levels were violated on the charts but most continue to find themselves extended well above their respective 50 DMAs and support levels, also suggesting some vulnerability to retracement. The SPX (page 2) and DJI remain in neutral trends with the rest positive.
- The data is mixed. The McClellan OB/OS Oscillators find the NYSE 1 day overbought with the rest neutral (All Exchange:+45.5/+0.41 NYSE:+53.35/-5.28 NASDAQ:+43.08/+8.5). The Total; Put/Call Ratio (0.93) and OEX P/C (0.44) are bullish with a neutral Equity P/C at 0.61. The OpenInsider Buy/Sell Ratio remains neutral as well at 30.7 but the Rydex Ratio (contrary indicator) is flashing its first bearish signal in several weeks as the leveraged ETF traders are now highly leveraged long at 1.39. The Inventors Intelligence Bear/Bull Ratio (contrary indicator) also finds advisors overly optimistic at a bearish 17.7/52.9. Valuation finds the SPX near fair valuation based on the forward 12 month consensus earnings estimates from Bloomberg of $163.40 at a 17.0 multiple versus the “rule of 20” implied fair value of 17.1.
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- In conclusion, we are maintaining our near term “neutral” outlook for the major equity indexes in place as the current positive trends on the charts are being counterbalanced by the issues discussed above.
- SPX: 2,736/2,784
- DJI: 24,665/25,337
- NASDAQ: 7,418/NA
- NDX: 6,943/NA
- DJT: 10,832/11,218
- MID: 1,950/NA
- Russell: 1,628/NA
- VALUA: 6,291/NA