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Near-Term Outlook Turns “Positive”

By Guy S. Ortmann, CMTStock MarketsAug 07, 2018 10:17AM ET
www.investing.com/analysis/nearterm-outlook-turns-positive-200336943
Near-Term Outlook Turns “Positive”
By Guy S. Ortmann, CMT   |  Aug 07, 2018 10:17AM ET
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Charts And Breadth Improve

All of the indexes closed higher Monday with positive internals on the NYSE and NASDAQ. NYSE volumes were lower than the preceding session while those of the NASDAQ increased. Several technical improvements were seen on the charts in the combination of violations of resistance and new closing highs. Overall market breadth improved as well. The data remains largely neutral without what we would perceive as strong cautionary signals. As such, we are now of the opinion that there has been sufficient shift in the weight of the evidence to change our near term outlook for the major equity indexes to “positive” from “neutral/positive”.

  • On the charts, all of the indexes closed higher yesterday with positive internals on the NSYE and NASDAQ. Several technical improvements were seen as the COMPQX (page 3), NDX (page 3) DJT (page 4), MID (page 4) and VALUA (page 5) all closed above their respective near term resistance levels. As well, both the MID and VALUA managed to register new closing highs. Overall market breadth improved as well with both the All Exchange and NYSE cumulative advance/decline lines turning positive from neutral. The NASDAQ cumulative A/D remains neutral. So we now find the short term trends for the indexes primarily positive with the two exceptions of the SPX (page 2) and RTY (page 5) remaining neutral.
  • The data is generally neutral including all of the McClellan OB/OS Oscillators (All Exchange:-0.34/-1.84 NYSE:+6.33/+16.42 NASDAQ:-6.61/-17.4). The Equity Put/Call Ratio (0.62), Open Insider Buy/Sell Ratio (43.9) and new AAII Bear/Bull Ratio (27.33/31.33) are all neutral as well. The Total P/c at a bullish 0.93 is being counterbalanced by a bearish 1.44 OEX Put/’Call Ratio. Valuation finds consensus forward 12-month earnings estimates for the SPX at $169.01, leaving the forward 12 month p/e for the SPX at 16.9 versus the “rule of 20” implied fair value of a 17.1 multiple. The “earrings yield” stands at 5.93%.
  • In conclusion, given the improvement on the charts and market breadth with a lack of onerous data signals, we believe there is enough improvement in the weight of the evidence to change our near term outlook for the major equity indexes from “neutral/positive” to “positive”.
  • SPX: 2,790/2,853
  • DJI: 25,000/26,000
  • NASDAQ: 7,698/7,892
  • NDX: 7,294/7,507
  • DJT: 10,925/11,254
  • MID: 1,966/NA
  • Russell: 1,654/1,712
  • VALUA: 6,394/NA

Near-Term Outlook Turns “Positive”
 
Near-Term Outlook Turns “Positive”

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