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Short-Term Uptrends Intact

By Guy S. Ortmann, CMTStock MarketsOct 11, 2017 09:01AM ET
www.investing.com/analysis/shortterm-uptrends-intact-200218193
Short-Term Uptrends Intact
By Guy S. Ortmann, CMT   |  Oct 11, 2017 09:01AM ET
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Some Charts Extended Above Support & 50 DMAs

Opinion

All of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as volumes rose above prior levels on both exchanges. One new closing high was achieved but we would note several of the charts are, in our opinion, extended above their respective support levels and 50 DMAs. Nonetheless, the near term uptrends remain intact and should be respected until proven otherwise. The data remains mixed and inconclusive.

  • On the charts, all of the indexes closed higher yesterday with positive internals. The DJI (page 2) made a new closing high while the DJT (page 4) managed to close back above its near term uptrend line that had been violated at the close of Monday’s session. All of the near term uptrend lines remain intact as do the uptrends of the cumulative advance/decline lines for the exchanges. However, we would note that in spite of the trends remaining positive, there may be some risk as several of the charts are now extended above their respective support levels and 50 DMAs. Our suspicion is the markets have priced in a robust earnings season that is just around the corner. Should earnings reports only meet or possibly miss, we believe the downside reaction might be more than would otherwise be expected.
  • The data remains mixed. All of the McClellan 1-day OB/OS Oscillators are neutral with the 21-day readings overbought (All Exchange:+14.89/+69.91 NYSE:+5.44/+71.04 NASDAQ:+25.94/+75.27). The Equity Put/Call Ratio (contrary indicator) is a bearish 0.54 while the Total (0.73) and OEX (1.24) Put/Call Ratios are neutral as is the Open Insider Buy/Sell Ratio at 50.1. The new AAII Bear/Bull Ratio remains neutral at 29.0/36.0 while the new Investors Intelligence Bear/Bull Ratio (contrary indicator) has turned mildly bearish at 17.0/55.5.
  • In conclusion, while there is nothing onerous on the charts or data to alter our opinion that the near term uptrends of the indexes should continue to be respected, the facts that the forward valuation of the SPX is at a 15-year high of an 18.6 forward multiple with several charts well above their respective support levels and 50 DMAs, we suspect the markets have priced in a very healthy earnings season. Should the earnings not prove to meet or beat expectations, some trouble may ensue.
  • Forward 12-month earnings estimates for the SPX from Bloomberg of $137.37 leave a 5.56 forward earnings yield on a 18.6 forward multiple, a decade high.
  • SPX: 2,508/NA
  • DJI: 22,403/NA
  • Nasdaq: 6,450/NA
  • NDX: 5,867/NA
  • DJT: 9,542/NA
  • MID: 1,740/NA
  • Russell: 1,450/NA
  • VALUA: 5,646/NA

Short-Term Uptrends Intact
 

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Short-Term Uptrends Intact

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