Charts See Further Improvement
Guy S. Ortmann, CMT | Apr 18, 2018 10:25AM ET
The bulk of the indexes closed higher Tuesday with the one exception of the DJT declining. Internals were positive on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. A combination of resistance level violations and moves above the 50 DMA level occurred, further improving the current state of the charts. The data is largely neutral although the 1 day McClellan OB/OS Oscillators are now overbought. In spite of the OB/OS levels, we are maintaining our near term “positive” outlook for the major equity indexes at this time.
- On the charts, the only index closing lower yesterday was the DJT (page 4). The rest rose with positive internals on higher trading volume. The DJI (page 2), COMPQX (page 3), MID (page 4) and RTY (page 5) all closed above their respective resistance levels while the SPX (page 2), DJI, COMPQX and NDX (page 3) closed back above their 50 DMAs. So we now find all if the index charts in near term uptrends and above their 50 DMAs, a condition not seen in several sessions. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are all positive and above their 50 DMAs as well. We would note, however, that recent strength has pushed all of the stochastic levels into overbought territory. Yet they are not actionable until bearish crossover signals appear. That has yet to occur.
- The data is largely neutral but the McClellan 1 day OB/OS Oscillators are now overbought with the 21 day readings staying neutral (All Exchange:+67.48/+4.17 NYSE:+75.33/+15.68 NASDAQ:+60.69/-5.64). The Equity Put/Call Ratio (0.68), OEX P/C Ratio (1.22) and OpenInsider Buy/Sell Ratio (37.1) are all neutral with the Total P/C Ratio (contrary indicator) a bullish 0.96. Forward valuation of the SPX based on forward 12-month consensus earnings estimates is at a 16.8 multiple with the “rule of 20” implying fair value at a 17.2 multiple.
- In conclusion, while the 1-day OB/OS and stochastic levels are overbought and may dampen progress, we are shy of seeing signals that would cause us to alter our near term positive outlook for the major equity indexes.
- Forward 12-month earnings estimates for the SPX from Bloomberg are $161.02 leaving a 5.95% forward earnings yield on a 16.8 forward multiple.
- SPX: 2,646/2,711
- DJI: 24,269/24,982
- Nasdaq: 7,100/7,330
- NDX: 6,584/6,825
- DJT: 10,391/10,788
- MID: 1,887/1,928
- Russell: 1,532/1,593
- VALUA: 6,007/6,167
Charts See Further Improvement
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