Resistance Levels Remain As Data Tilts Slightly CautionaryOpinion
All of the indexes closed lower yesterday with mixed internals on the NYSE and negative internals on the NASDAQ. Volumes declined on both exchanges while the indexes closed near their intraday lows. Some resistance levels were challenged but none were violated while the short term data is seeing a few yellow lights blinking on the dashboard. As such we now expect the indexes to take a pause over the near term and are sifting our short term outlook to neutral. Advance/Decline lines have yet to show sufficient improvement to alter or cautious intermediate term outlook.
- On the charts, all of the indexes closed lower yesterday with generally negative internals. Volumes decline versus the prior session. No technical events of import were generated, in our opinion. However, the DJI (page 2), COMPQX (page 3), DJT (page 3) and VALUA (page 5) all tested resistance but were unable to surpass their barriers. The stochastic levels for the DJI and VALUA are now overbought suggesting some moderation in progress for those indexes. Our net take on the charts is some sideways trading or digestion may be the higher probability before said resistance levels can be overcome.
- The data is a mixed bag but a couple of near term points now cast some shadows over short term prospects. All of the McClellan OB/OS Oscillators are now overbought (All Exchange:+73.93 NYSE:+85.96 NASDAQ:+64.16). All of the OB/OS 21 day readings remain neutral. As well, the OEX Put/Call Ratio (smart money) now finds the pros quite heavy in puts at 2.04 as they expect some near term weakness. Yet psychology remains constructive as the Gambill Insider Buy/Sell Ratio remains quite bullish at 65.3 showing insiders remain very active buyers. And the new AAII Bear/Bull Ratio (contrary indicator) still shows the crowd remaining quite nervous in spite of the recent rally at 37.8/27.56. So while psychology remains positive, some of the shorter term oriented data levels suggest a bit of caution for the moment.
- In conclusion, the combination of resistance levels and short term data suggest some sideways movement or consolidation over the near term while the A/D lines have yet to improve enough to change our intermediate term concerns.
- Forward 12-month earnings estimates for the SPX from IBES is $123.27 leaving a 6.43% forward earnings yield with a 15.6 forward multiple.
- SPX: 1,874/1,937
- DJI: 15,893/16,483
- NASDAQ; 4,280/4,547
- DJT: 6,790/7,022
- MID: 1,262/1,317
- Russell: 958/1,021
- VALUA: 3,830/4,074