Charts Intact But Data Suggests Slowing Of Progress
Opinion: While the index charts remain intact with several making new closing highs on Friday, the rally has now pushed most of the McClellan OB/OS Oscillators into overbought territory while with some additional data suggesting some slowing of progress for the very near term.
- On the charts, several indexes made new closing highs on Friday including the SPX (Page 2), DJI (page 2), DJT (page 3) and MID (page 4) as the internals saw positive breadth and up/down volume. The DJT’s new closing high helps dispel our prior concern mentioned in recent reports regarding its previous negative implications. The RUT, which had been suffering dearly over the past month, saw progress as well as it managed to close above its near term resistance level that is now adjusted to 1,172. As such, all of the current bullish trends remain intact. However, we would not ignore the fact that some of the current uptrends are rather extended above their respective uptrend lines and volume support levels.
- On the data, the current rally has lifted the McClellan OB/OS Oscillators to the point where 3 of the 4 are now overbought. The NYSE 1 day is mildly overbought at +53.66 with an overbought 21 day of +77.52. The NASDAQ 1 day is overbought at +84.8 with a neutral 21 day of +40.14. The Equity Put/Call Ratio (contrary indicator) now signals the “crowd” as too bullish at .47 after having loaded up on calls while the WST Ratio and its Composite remain bearish at 69.0 and 158.0 respectively. As such, these data points are implying at least some slowdown of the recent market strength for the near term.
- In conclusion, while the charts remain intact, some data is suggesting some moderation of strength or consolidation over the near term for the major equity indexes.
- For the longer term, we remain bullish on equities as they remain undervalued with a 6.36% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $123.92 versus the 10 Year Treasury yield of 2.60%.
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