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More New Closing Highs

By Guy S. Ortmann, CMTStock MarketsJun 15, 2018 09:58AM ET
More New Closing Highs
By Guy S. Ortmann, CMT   |  Jun 15, 2018 09:58AM ET
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Data Caution Signals Persist


The bulk of the indexes closed higher yesterday with the one exception of the DJI posting a loss. Internals were positive on the NYSE and NASDAQ as NYSE volumes dipped from the prior session while those on the NASDAQ rose. Some new closing highs were registered on the charts as well as one potential warning signal. The data remains mixed but, in our opinion, finds more caution levels appearing. As such, while the indexes for the most part march higher, divergences are appearing while issues discussed below suggest we maintain our “neutral” near term outlook intact as risk of some downside action elevates.

  • On the charts, the only index closing lower yesterday was the DJI (page 2). The rest posted gains with the COMPQX (page 3), NDX (page 3) and RTY (page 5) making new closing highs. One warning signal came in the form of the DJT (page 4) flashing a bearish stochastic crossover signal. The rest of the stochastic levels remain well into overbought territory but have yet to roll over. They may remain in that state for an extended period but, in our view, suggest some potential for risk is present. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs but appear to be moderating in slope. While no sell signals have been generated, the fact that prices are extended well above their 50 DMAs and support suggest any correction may be more sudden and larger in magnitude than might be expected.
  • The data is mixed. The McClellan OB/OS Oscillators are neutral on the 1 day readings and overbought at the 21 day levels (All Exchange:+8.09/+55.1 NYSE:+4.6/+63.87 NASDAQ:+13.75/+52.15). A positive signal is coming from the OEX Put/Call Ratio at 0.85 as the pros remain long calls. However, the Equity P/C (contrary indicator) is a bearish 0.5 as the crowd is also long calls. While neutral at 29.9, the OpenInsider Buy/Sell Ratio shows insiders have seen more selling than buying during the rally while the new Investors Intelligence Bear/Bull Ratio (contrary indicator) now finds bullish advisors swamping bears at 17.7/58.9. Valuation finds the SPX near fair valuation based on the forward 12-month consensus earnings estimates from Bloomberg of $163.27 at a 17.0 multiple versus the “rule of 20” implied fair value of 17.1.
  • 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 that imply risk is present due to a weakening of the shock absorbers.
  • 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

More New Closing Highs
More New Closing Highs

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