Investing.com - Financial Markets Worldwide

Charts Imply Short-Term Bottom Achieved

Published 08/08/2019, 10:11 AM
Updated 07/09/2023, 06:31 AM
NDX
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US500
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DJI
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US2000
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IXIC
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DJT
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US10YT=X
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MID
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  • Internals were negative on the NYSE while the NASDAQ saw negative breadth but positive up/down volume.

  • Overall trading volumes increased from those of the prior session while most indexes saw significant intraday reversals to the upside with the gainers closing at or near their intraday highs.

  • A number of the charts saw action we believe to be suggestive that some near term bottoms have been achieved in the following fashion.

  • The SPX (page2) tested its support successfully while closing near resistance and generating a “bullish stochastic crossover”.

  • The DJI (page 2) had the same chart action as the SPX although closing slightly lower on the day.

  • The COMPQX and NDX both saw “bullish stochastic crossovers” as well as “bullish engulfing patterns” that occur when a stock or index opens below the prior day’s open and closes above the prior day’s close with the NDX closing at resistance.

  • The DJT (page 4) tested support and may have formed a “hammer” suggesting a washout of the sellers.

  • The MID (page 4) saw a “bullish stochastic crossover” as well as a “bullish engulfing pattern”.

  • The VALUA (page 5) tested support successfully while forming a “hammer” also suggesting a washout of sellers.

  • However, no resistance levels were actually violated and, in our opinion, remain formidable.

    • The data is largely unavailable this morning.

    Valuation remains compelling assuming current forward earnings estimates for the SPX hold. The 12-month forward consensus earnings estimate from Bloomberg for the SPX is now $172.29, leaving the forward p/e at a 16.7 multiple while the “rule of twenty” finds fair value at 18.3. This suggests valuation is considerably more appealing now than just a few weeks ago.

  • The 10-Year Treasury yield is 1.68%.

  • The earnings yield stands at 5.97%.

    • In conclusion, while yesterday’s action was positive, penetrations of significant overhanging supply need to be violated before altering our near term “neutral” outlook for the major equity indexes.

  • SPX: 2,821/2,894

  • DJI: 25,514/26,083

  • Nasdaq: 7,648/7,910

  • NDX: 7,358/7,550

  • DJT: 9,991/10,356

  • MID: 1,851/1,900

  • Russell: 1,466/1,520

  • VALUA: 5,889/6,101

    • Resistance Levels Remain Formidable

    The major equity indexes closed mixed yesterday with negative internals on the NYSE and mixed internals on the NASDAQ as trading volumes increased from those of the prior session. While no resistance levels were violated on the charts, several of the indexes saw significant intraday reversals with chart action suggestive of some near term bottoms being achieved. The bulk of the data is unavailable this morning but we would suspect the previous oversold conditions for the McClellan 1-day OB/OS Oscillators have been relieved. Importantly, in our opinion, significant overhanging volume persists on the charts suggesting yet more work may be required to continue advancing. As such, we are maintaining our near term “neutral” outlook for the major equity indexes.

    On the charts, the indexes closed mixed yesterday with DJI (page 2), DJT (page 4) and RTY (page 5) closing lower as the rest advanced.

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