Short-Term Outlook Remains “Neutral”Opinion
All of the indexes closed lower yesterday with negative internals as volumes rose slightly from the prior session. Most closed near the midpoints of their intraday trading ranges. Not much changed on the charts other than oil, discussed in yesterday’s comments, closing above resistance. That data has turned more encouraging. However, we have yet to see the index charts signal a more positive tone to alter our near term “neutral” outlook. Valuation keeps us “neutral” for the intermediate term.
- On the charts, all of the indexes closed lower with all closing near their intraday midpoints with the exception of the DJT (page 3) that closed near its lows. No support levels were violated. However, the VALUA (page 5) closed below its intermediate term uptrend line from the beginning of March. So the index charts remain largely neutral. The oil USO (NYSE:USO) ETF (page 9) discussed in yesterday’s comments, that was down during the day, recovered enough to close above high volume resistance, thus continuing to imply higher prices over the near to intermediate term, in our opinion.
- The data has improved to some degree with the All Exchange and NASDAQ 1 day McClellan OB/OS Oscillators remaining oversold at -58.18 and -76.92 respectively. Psychology has improved as well with the OEX Put/Call Ratio (smart money) finding the pros very heavy in calls at 0.42 an expecting strength while the crowd has become more fearful and heavy in puts via the Total and Equity Put/Call Ratios (contrary indicators) at 1.28 and 0.8 respectively. The new AAII Bear/Bull Ratio (contrary indicator) is also showing a fearful crowd with bears well outnumbering bulls at 31.29/20.41. Meanwhile, the Gambill Insider Buy/Sell Ratio inched up slightly to 20.5 but remains neutral.
- In conclusion, while the data has become more optimistic for the near term, the charts have yet to show a response. So although we would like to be more enthusiastic, we remain “neutral” for the near term until the charts show a more positive tone.
- For the intermediate term, we remain “neutral” as the IBES forward 12 month earnings estimates for the SPX of $124.44 still leave market valuation in the upper end of its historical range.