Breaking News

Data Still Implies Defense

By Guy S. Ortmann, CMTStock MarketsJan 31, 2013 10:32AM ET
Data Still Implies Defense
By Guy S. Ortmann, CMT   |  Jan 31, 2013 10:32AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
We continue to be of the opinion that a somewhat defensive tone should be taken regarding the major equity indexes over the near term based on the data and charts.
  • Although yesterday’s weakness did bring some of the one-day data points down into neutral territory, the slightly longer-term data continues to suggests caution for the short term. The NYSE and OTC 21 day McClellan OB/OS Oscillators remain overbought (the NYSE notably so) at +123.2 and +68.08 respectively.
  • The percent of SPX stocks above their 50-DMAs remains extended at 88.2 as the NYSE Net New Highs has made a lower low with the OTC Net New Highs now having made a lower high and a lower low. The Net New High data suggests internal deterioration.
  • Meanwhile, sentiment that has the greater short term influence remains at opposite extremes with a Rydex Ratio (contrary indicator) of 40.7 showing the leveraged ETF traders still heavily long while the Gambill Insider Buy/Sell Ratio remains at a very low and cautionary 5% as of 1/29. Insiders are almost totally absent from the buying roster. As such, the data, in our opinion, suggests short term caution should continue to be exercised.
  • On the charts, there are only two points worthy of comment. First, and possibly most important, is the DJT (page 3) being the worst performer of the day yesterday by a sizable margin. As stated over the past several weeks, it has been our opinion that the DJT has been the “leading index” for the overall markets. If that continues to be the case, yesterday’s action sets a darker short term tone.
  • We would also note the OTC (page 3) formed a “bearish engulfing pattern” yesterday. The pattern happens when a stock or index opens and closes down at levels that completely engulf the prior day’s “real body”. It is considered a short term bearish signal. As a number of the candlestick patterns have not played out lately, we would not over emphasize this event. Yet given the state of current evidence, it adds to our short term concern.
  • For the longer term, the outlook remains bullish for equities as the IBES Valuation Model suggests equities are quite undervalued with the forward 12-month earnings yield for the SPX versus the 10-year Treasury yield standing at 7.5% versus 1.97%.
  • SPX:1,456/1,520
  • DJI:13,577/?
  • OTC:3,050/3,170
  • DJT:5,528/?
  • RUT:8875/?
Data Still Implies Defense
Data Still Implies Defense

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Write your thoughts here
Replace the attached chart with a new chart ?
Post also to:
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email