Near-Term Outlook Turns “Neutral/Positive”Opinion
The bulk of the indexes closed higher yesterday with the one exception of the DJT closing fractionally lower. All closed at or near their intraday highs with positive internals on the NYSE and NASDAQ as volumes dipped from the prior session on both exchanges. Several encouraging technical events occurred on the charts while cumulative breadth improved. The data is largely neutral. While no resistance levels were broken on the charts, the overall positive action was enough to cause a shift from our prior near term “neutral” outlook to “neutral/positive”.
- On the charts, all but the DJT (page 4) closed higher yesterday and at or near their intraday highs with positive internals. The intraday swings were significant, including an 800 point swing on the DJI (page 2). Several encouraging technical events occurred on the charts. The SPX (page 2), DJI, COMPQX (page 3) and NDX (page 3) all registered “bullish engulfing patterns”. These are notable positive events implying potential reversal of the prior trend. Bullish engulfing patterns are formed when a stock or index opens below the prior session low and closes above the prior session high, completely engulfing the prior days range. It suggests a washout of sellers with significant entrance of buying demand. The COMPQX and NDX also saw “bullish stochastic crossovers”, following those seen in some of the other indexes earlier this week. Finally, the SPX managed to close above its short term downtrend line, shifting the trend to neutral from negative.
- The cumulative advance/decline lines improved as well with the NYSE and NASDAQ turning positive with the All Exchange’s turning neutral from negative. The NYSE A/D is now above its 50 DMA. However, the major points holding us back from turning more positive are the facts that no resistance levels were violated with most remaining in near term downtrends.
- The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+10.6/-3.99 NYSE:+22.78/+4.65 NASDAQ:-0.1/-8.98).
- In conclusion, yesterday’s dramatic bullish reversals combined with improved market breadth and a neutral data dashboard are sufficient to alter our near term outlook to “neutral/positive” from “neutral”.