Data Remains Constructive
Opinion
The indexes closed mixed yesterday with positive internals as volumes declined from the prior session. While no resistance levels were violated, a few events took place on the charts offering some further short term encouragement. As well, the data remains largely supportive for expectations of some further near term lift. However, we remain cautious for the more intermediate term given a much needed improvement in market breadth, significant levels of overhanging supply, intermediate downtrend lines remaining intact and a lack of recovery in commodities that would signal an improvement in industrial demand.
- On the charts, the indexes closed mixed with positive internals. The overall action was constructive, in our opinion, as a few positive signals were generated. The DJT (page 3), which we still consider to be the leading index, actually closed above its short term downtrend line for the first time since the beginning of the year. The VALUA (page 5) which is an unweighted and broader index than those usually noted by the media also made the same achievement. As well, the COMPQX (page 3) managed to edge up just enough to flash a bullish stochastic crossover signal. So although no technical resistance levels were approached or violated, the action was positive enough to offer some further near term encouragement.
- The data remains largely positive as well with all of the McClellan OB/OS Oscillators remaining oversold (All Exchange:-76.25 NYSE:-86.25 NASDAQ:-68.4). The OEX Put/Call Ratio (smart money) still shows the pros betting on strength as they are weighted in calls at .78 while the crowd measured by the Rydex Ratio (contrary indicator) leveraged ETF traders continue to drop their long positions to 36.0. Insiders continue buying with a bullish 39.5 Gambill Insider Buy/Sell Ratio. Also, the AAII Bear/Bull Ratio (contrary indicator) now shows public consensus to have the highest level of bears versus bulls since the financial crisis market lows in early 2009 at 48.71/21.52.
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- In conclusion, we are of the opinion that the recent chart action combined with the data suggests some further upside as the higher probability over the near term with potential for the indexes to test their respective resistance levels. The intermediate term remains debatable.