McClellan OB/OS Oscillators Oversold Opinion
The bulk of the indexes closed lower yesterday with negative internals as volumes rose again from the prior session. The one exception was the DJT (page 3) closing higher on the day. More of the index charts violated support, following in the footsteps of the RTY in the prior session. The data remains a mix of counterbalancing signals resulting in a lack of high probability projections of near term market trajectory. Given the break in the charts, our discipline forces us to shift our short term view for the indexes form “neutral” to “neutral/negative”. The intermediate term outlook remains “neutral”.
- On the charts, only the DJT closed higher on the day. Volumes grew as internal breadth remained negative. All but the DJT closed near their intraday lows. Chart deterioration came in the form of the COMPQX (page 3) closing below near term support as well as its 50 DMA. Both the MID (page 4) and VALUA (page 5) closed below their near term support levels as well. The series of lower highs among all of the indexes remain intact. We need to see a violation of the series of lower highs to in order to become more constructive in our technical view.
- The data remains conflicted. Positive signals are coming from the McClellan OB/OS Oscillators that are all now in oversold territory (All Exchange:-67.12/-59.18 NYSE:-60.96/-53.12 NASDAQ:-75.5/-64.3). However, the OEX Put/Call Ratio (smart money) still finds the pros very heavily weighted in puts at 2.45 as they bet on further weakness. The WST Ratio/Composite is bearish as well at 71.4/153.0. The rest of the data is neutral with a 14.1 Gambill Insider Buy/Sell Ratio, 0.55 Equity Put/Call Ratio and 0.84 Total Put/Call Ratio. So the data scales, in our opinion, are too evenly balanced at this stage to yield a high probability assumption.
- In conclusion, the weakening of the chart action for the indexes with deteriorating breadth combined with inconclusive data projections is requiring us to alter our near term outlook for the indexes from “neutral” to “neutral/negative”. Forward 12 month valuation of the SPX staying near historically high levels leaves our intermediate term view at “neutral”.