DJT Breaks Support & DMAsOpinion
All of the indexes closed lower yesterday with negative internals as volumes rose from the prior session. While the damage was not severe, the chart action saw multiple negative signals on the DJT while the VIX rose from its 2 year support level. In the process, several of the data points moderated from their prior cautionary signals. However, in spite of said moderation, the charts suggest some further corrective action over the near term. As such, our near term outlook remains “neutral/negative” with the intermediate term staying “neutral” due to extended valuation.
- On the charts, all of the indexes closed lower with broadly negative internals as volumes rose notably from the prior session, imply institutional distribution. The technical points of note came largely from the DJT (page 3) that closed below near term support as well as its 50 and 200 DMAs. As well, the RUT (page 4) joined the bulk of the indexes as it flashed its own “bearish stochastic crossover” signal. The VIX (page 9), that has been discussed is our recent comments, did see a lift off of its 2 year support level as volatility rose which translated into lower index prices, as was speculated. As the VIX remains relatively low while support and Fibonacci retracements on the charts have yet to be tested, some further weakness may be implied.
- On the other hand, the data moderated in several areas. Both the All Exchange and NYSE 1 day McClellan OB/OS Oscillators entered oversold territory at 55.6 and 72.75. All of the 21 day levels drifted down into neutral levels from their prior overbought conditions (All Exchange:+43.28 NYSE:+50.8 NASDA:+38.34). As well, the OEX Put/Call Ratio (smart money) now finds the pros neutral at 1.34 versus their prior heavy put exposure. However, two disturbing points remain. The Gambill Insider Buy/Sell Ratio at a bearish 6.4 still finds insiders to be active sellers while the Rydex Ratio (contrary indicator) sees the leveraged ETF traders at a 2016 peak of leveraged long at 60.0. So while some of the data has improved, it may not yet be strong enough to tilt the scales to a positive outlook.
- In conclusion, we remain near term “neutral/negative” for the indexes based on recent chart signals and the VIX still implying further volatility. Extended valuation keeps our intermediate term outlook at “neutral”.