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Some Resistance Levels Violated

By Guy S. Ortmann, CMTStock MarketsApr 13, 2018 10:23AM ET
Some Resistance Levels Violated
By Guy S. Ortmann, CMT   |  Apr 13, 2018 10:23AM ET
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Data Mixed


All of the indexes closed higher Thursday with positive internals on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. Some improvements were seen on the charts as some resistance levels and 50 DMAs were violated to the upside. The data is sending mixed messages and thus is not very instructive at this point. However, even with the recent improvements from a technical viewpoint, we are inclined to remain near term “neutral/positive” in our outlook for the major equity indexes.

  • On the charts, all of the indexes closed higher yesterday with positive internals on higher trading volumes from the prior session. Improvements were seen in the form of the COMPQX (page 3) and RTY (page 5) closing above their respective resistance levels and turning their near term trends positive from neutral. Also, the MID (page 4) and VALUA (page 5) closed back above their 50 DMAs but remain below resistance. We also saw the SPX (page 2) and DJI (page 2) test their resistance levels but were, once again, unable to violate on a closing basis. The NDX (page 3) closed on resistance. All of the cumulative advance/decline lines are positive and above their 50 DMAs. Yet we would also note some of the stochastic levels have now entered overbought territory but have not signaled bearish crossovers at this stage.
  • The data is mixed. All of the McClellan OB/OS Oscillators remain neutral (All Exchange:+39.74/-15.83 NYSE:+33.9/-10.15 NASDAQ:+44.64/-20.5) as are the Equity Put/Call Ratio (0.66) and OpenInsider Buy/Sell Ratio (39.2). The Total Put/Call Ratio (contrary indicator) is a bullish 0.99. However, the pros have really loaded up on puts with a very bearish 3.71 OEX Put/Call Ratio. Valuation finds the forward p/e for the SPX based on forward 12 month consensus earnings estimates of $160.94 at a 16.6 multiple versus the “rule of 20” implied fair value of a 17.2 multiple.
  • In conclusion, while we continue to be encouraged by recent market action, the improvements have not yet been compelling enough to alter our near term “:neutral/positive” outlook for the major equity indexes.
  • Forward 12-month earnings estimates for the SPX from Bloomberg are $160.94 leaving a 6.04% forward earnings yield on a 16.6 forward multiple.
  • SPX: 2,581/2,671
  • DJI: 23,487/24,634
  • NASDAQ: 6,944/7,254
  • NDX: 6,304/6,659
  • DJT: 10,125/10,571
  • MID: 1,838/1,914
  • Russell: 1,506/1,576
  • VALUA: 5,859/6,108

Some Resistance Levels Violated

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