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More Indexes Closes Above Resistance

By Guy S. Ortmann, CMTStock MarketsNov 07, 2018 10:02AM ET
www.investing.com/analysis/more-indexes-closes-above-resistance-200356128
More Indexes Closes Above Resistance
By Guy S. Ortmann, CMT   |  Nov 07, 2018 10:02AM ET
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Data Remains Mixed

All of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as NYSE volumes dipped from the prior session while those of the NASDAQ rose. The charts saw several of the indexes close above near term resistance, turning their short term trends positive, as overall breadth improved. The data remains mixed but with one contrarian indicator giving an important historical signal. As such, we are maintaining our near term “neutral/positive” outlook for the major equity indexes in place.

  • On the charts, all of the indexes closed higher yesterday with most closing at or near their intraday highs with positive internals. The charts saw the SPX (page 2), DJI (page 2) DJT (page 4) and MID (page 4) close above their respective near term resistance levels. As such, we now find the SPX, DJI, DJT, MID and VALUA (page 5) now in short term uptrends. The rest remain neutral. Overall market breadth improved a bit further with the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ edging higher but remaining below their 59 DMAs.
  • The data is mixed. Recent gains have pushed al of the 1-day McClellan OB/OS Oscillators into overbought territory with the 21-day levels neutral (All Exchange:+68.57/-39.09 NYSE:+73.45/-28.05 NASADQ:+66.59/-48.04). The % of SPX stocks trading above their 50 DMAs is a neutral 35.1 as is the Open Insider Buy/Sell Ratio at 112.8. However, the detrended Rydex Ratio (contrary indicator page 8) at -2.58 shows the leveraged ETF traders extremely leveraged short at levels seen only four times since 2009. In each case, those levels were coincident with market bottoms. Seasonality remains encouraging has the November to April period coming out of a mid-term election year has seen positive returns since 1946 with a median return of 15% since 1930. Only two out of 21 periods were negative. Valuation, assuming current estimates hold, remains below implied fair value with the forward 12 month earnings estimates for the SPX via Bloomberg dipping to $171.77, leaving the forward 12-month p/e for the SPX at 16.0 versus the “rule of 20” implied fair value of a 16.8 multiple. The “earnings yield” stands at 6.23%.
  • In conclusion, given the current condition of the charts and data, they suggest we maintain our near term “neutral/positive” outlook for the major equity indexes.
  • SPX: 2,703/2,768
  • DJI: 25,232/25,807
  • NASDAQ: 7,275/7,434
  • NDX: 6,892/7,079
  • DJT: 10,175/10,596
  • MID: 1,847/1,898
  • Russell: 1,500/1,570
  • VALUA: 6,010/6,156

More Indexes Closes Above Resistance
 

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