Data Turns Neutral/Negative
Opinion
While yesterday’s action was positive as all of the indexes closed higher and near their highs of the day on positive breadth, we now find several of the indexes near important resistance levels that could prove problematic for the near term. While there were a few chart improvements, we now find the data losing some of its prior bullish implications leading us to the conclusion that the recent rally may be nearing its short term peak.
- On the charts, the DJT (page 3) managed to close above resistance as well as its short term downtrend line. The MID (page 4) also closed above its short term downtrend line while the COMPQX (page 3) closed above its 200 DMA. All of the indexes closed near their highs of the day but are now very near what we suspect may be high volume resistance levels. Given the fact that said resistance has high volume and is quite “fresh”, we suspect it may prove to be a stalling point for the indexes over the near term.
- Looking at the data, its prior bullish implications have retreated to a more neutral/negative message. The WST Ratio and its Composite are now both overbought at 87.1 and 182.3 while the prior bullish signals coming from the Total and Equity Put/Call Ratios (contrary indicators) have slid to neutral at .88 and .59 respectively. The OEX Put/Call Ratio (smart money) still finds the pros betting on weakness at a very negative 2.0 while the NYSE 1 day McClellan OB/OS is now overbought at +53.58. The NASDAQ 1 day is a neutral +43.63 while both of the 21 days remain oversold at -56.3 and -64.73 respectively. The Gambill Insider Buy/Sell Ratio still shows insiders selling strength as it has dropped to 11.0%. So although the data is not totally negative, its prior bullish message has left the stage.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or
remove ads
.
- In conclusion, we believe the charts and data are implying the lion’s share of the reflex rally has been had with near the near term outlook turning a bit more cautionary.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 6.78% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $129.05 versus the 10 Year Treasury yield of 2.18%.
- S&P 500: 1,826/1,906
- Dow 30: 15,874/16,464
- NASDAQ Composite: 4,145/4,465
- Dow Jones Transportation: 7,984/8,244
- S&P Midcap 400: 1,267/1,340
- Russell 2000: 1,075/1,099