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Near-Term Outlook Remains “Neutral”

By Guy S. Ortmann, CMTStock MarketsJun 08, 2018 10:24AM ET
Near-Term Outlook Remains “Neutral”
By Guy S. Ortmann, CMT   |  Jun 08, 2018 10:24AM ET
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Insiders Continue Selling


The indexes closed mixed Thursday with positive internals on the NYSE with flat volumes while the NASDAQ’s internals were negative on higher trading volume. No technical events of import were generated on the charts while the data is still casting some cautionary shadows. As such we still have yet to see enough of a change in the evidence that would cause a shift from our current “neutral” outlook for the major equity indexes for the near term.

  • On the charts, the indexes closed mixed yesterday with the DJI (page 2), DJT (page 4) and MID (page 4) posting gains as the rest declined. NYSE internals were positive while those on the NASDAQ were negative as trading volume increased there as well. No technical events of import were generated leaving all but the DJT in short term uptrends. The DJT remains neutral. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs. However, we would reiterate our observation that the stochastic levels are overbought across the board with the one exception of the DJT. While they have yet to flash bearish crossover signals and can stay overbought for extended periods, they do imply potential for some degree of retracement. The VIX at 12.13 is near its 2018 lows, is suggesting volatility may be on the horizon, in our opinion.
  • The data continues to cast some shadows. While the 1 day McClellan OB/OS Oscillators for the All Exchange and NASDAQ have dipped back to neutral, the rest remain in overbought territory (All Exchange::+38.87/+63.01 NYSE:+51.5/+75.14 NASDAQ:+30.43/+56.79). Correcting our misstatement in yesterday’s comment, insider selling has picked up to a notable degree since last week as the OpenInsider Buy/Sell Ratio has dropped from 45.4 to 28.1. While it remains neutral, it suggests insiders have used recent strength to lighten up on their exposure. The OEX Put/Call Ratio is bearish at 1.45 as the pros are long puts. The Equity P/C is a neutral 0.56 with the Total P/C (contrary indicator) is bullish at 0.92. Valuation finds the SPX close to fair valuation based on the forward 12 month forward 12 month consensus earnings estimates from Bloomberg of $163.34 at a 17.0 multiple versus the “rule of 20” implied fair value of 17.1.
  • In conclusion, the stochastic levels combined with the OB/OS oscillators, insider selling, VIX and valuation suggest we maintain our near term “neural” outlook for the major equity indexes as better buying opportunities may present themselves over the near term.
  • SPX: 2,736/2,784
  • DJI: 24,665/25,337
  • NASDAQ: 7,418/NA
  • NDX: 6,943/NA
  • DJT: 10,713/10,995
  • MID: 1,950/1,995
  • Russell: 1,628/NA
  • VALUA: 6,291/6,405

Near-Term Outlook Remains “Neutral”

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Near-Term Outlook Remains “Neutral”

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