Stochastic Levels OverboughtOpinion
The indexes closed mixed yesterday with fractional changes in price. Internals were slightly negative as volumes declined notably on both exchanges from the prior session. No technical events of import occurred. The data remains largely neutral with a few minor improvements. As such, our near term outlook remains “neutral/positive” while our intermediate term view remains “neutral”, largely due to what we see as valuation being somewhat stretched. Market breadth remains quite positive.
- On the charts, the large-cap indexes closed fractionally higher yesterday while the rest saw modest declines. Volumes shrank implying a pause as opposed to distribution while internals were slightly negative. There were no technical events of import recorded. However, we would note that the stochastic levels for all but the DJT (page 3) are now in overbought territory. We would again stress that the stochastic readings can stay overbought for extended periods. Their message does not become negative and actionable unless bearish crossovers are triggered. We do not have those conditions at this point in time.
- The data remains largely neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:+32.89 NYSE:+30.99 NASDAQ:+35.51) fading form yesterday morning’s slightly overbought signals. Bothe the WST Ratio and its Composite are neutral at 61.1 and 147.7 along with the Equity Put/Call Ratio of 0.68. The new AAII Bear/Bull Ratio of 24.89/27.85 is neutral as well. There was some slight improvement in the OEX Put/Call Ratio (smart money) that turned a mildly bullish 0.89 while the Gambill Insider Buy/Sell Ratio improved to 13.3 while remaining neutral.
- In conclusion, both the charts and data are suggesting to us that the near term prospects for the indexes remain “neutral/positive”. And while market breadth remains quite healthy, forward valuation levels for the SPX are high enough to keep us “neutral” for that timeframe.