McClellan 1 Day OB/OS Mildly Overbought
All of the indexes closed higher Tuesday with positive internals on heavy trading volumes on both the NYSE and NASDAQ. Several of the index charts saw prices close above resistance and, importantly, high “volume at price” (VAP) levels that had been obstructions over the past several sessions. Other chart improvements, discussed below, were achieved as well. The data has become a bit mixed with the OB/OS levels mildly overbought. As such, we are maintaining our near term “neutral/positive” outlook for the major equity indexes in place at this time.
On the charts, all of the indexes closed higher yesterday with positive internals and heavy trading volume on the NYSE and NASDAQ.
- Improvements were seen on the charts as the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (page 3) all closed above their near term resistance levels as well as important high VAP levels that were needed to be violated, in our opinion, for further progress to occur.
- Also, the COMPQX, NDX and MID (page 4) closed above their 50 DMAs with the MID also closing above resistance.
- We would now speculate that the high VAP levels that were functioning as resistance may convert to support.
- As such, all of the indexes except the DJT are now in near term uptrends with the DJT neutral.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are positive and above their 50 DMAs.
The data is mostly neutral.
- However, the 1-day McClellan OB/OS Oscillators are now mildly overbought (All Exchange:+53.85 NYSE:+55.57 NASDAQ:+53.65).
- The Open Insider Buy/Sell Ratio (64.3) and the % of SPX stocks above their 50 DMAs (60.8) are neutral as is the detrended Rydex Ratio (contrary indicator) at –0.21.
- The new AAII Bear/Bull Ratio (contrary indicator) found bearish sentiment persisting at 38.67/24.0. We view this lack of enthusiasm on the part of the crowd as a positive.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX stands at $170.56, leaving the forward p/e at a 17.1 multiple while the “rule of twenty” finds fair value at 17.9 suggesting the SPX may be slightly undervalued. This is based on the assumption that said estimates will hold. The shift in valuation has largely been due to the notable drop in the 10-Year Treasury yield to 2.06%. The earnings yield stands at 5.85%.
In conclusion, yesterday’s chart achievements combined with the data suggest we maintain our near term “neutral/positive” outlook for the major equity indexes at this time.