Some Psychology Data ImprovesOpinion
All of the indexes closed higher Monday with positive internals on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. The charts saw several resistance levels violated, turning neutral near term trends positive while some 50 DMAs were reclaimed. The data remains largely neutral with some improvement in the psychology sector. As such, we are now inclined to shift our near term outlook to “positive” form “neutral/positive”.
- On the charts, all of the indexes closed higher yesterday with positive internals on higher trading volumes. All closed near the upper end of their intraday ranges. Improvements were seen with the SPX (page 2), NDX (page 3), DJT (page 4) and VALUA (page 5) all closing above resistance. The DJT and MID (page 4) closed back above their 50 DMAs as well. Thus we now find the bulk of the indexes in positive short term trends with the exceptions of the DJI (page 2) and MID remaining neutral. All of the cumulative advance/decline lines remain positive and above their 50 DMAs. One moderating factor is, as a result of recent strength, all of the stochastic levels are now in overbought territory. However, they may remain that way for extended periods. As such they are not actionable until bearish crossovers are generated.
- The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+44.16/+0.74 NYSE:+48.81/+12.0 NASDAQ:+39.36/-8.97). The Equity (0.64) and OEX (1.25) put/call ratios are neutral as well as is the OpenInsider Buy/Sell Ratio at 44.4. We would draw attention to the improvement in the AAII Bear/Bull Ratio (contrary indicator) from the psychology basket as the crowd has turned negative on the markets with bears outnumbering bulls 37.67/29.33. Forward valuation of the SPX based on current forward 12 month consensus earnings estimates is at a 16.6 multiple versus the “rule of 20” implied fair value at a 17.2 multiple.
- In conclusion, we now believe enough evidence has been generated to alter our near term outlook for the major equity indexes form “neutral/positive” to “positive.