Guy S. Ortmann, CMT | Nov 02, 2022 09:28AM ET
The major equity indexes closed mixed Tuesday with positive NYSE internals, while the Nasdaq saw positive breadth but slightly negative up/down volume.
However, there were no violations of support or trend, thus leaving all the index charts in near-term uptrends, as we believe the indexes are consolidating recent gains. The data is little changed with the McClellan 1-day OB/OS Oscillators staying on a mix of overbought and very overbought signals.
Also, market valuation is a little stretched via the “rule of 20”.On the other hand, it is our opinion that the extremely bearish crowd outlook (contrarian indicator) remains a potentially positive upside catalyst. As such, while we remain generally positive in our expectations, the OB/OS and valuation suggest waiting for weakness and tests of support for buying opportunities.
On the charts, the major equity indexes mixed yesterday with positive NYSE internals, while the Nasdaq registered positive breadth but somewhat negative up/down volume.
The data still finds the McClellan OB/OS Oscillators overbought with the NYSE very overbought (All Exchange: +98.87 NYSE: +118.16 Nasdaq: +86.27). They remain cautionary. We reiterate there are occasions when the levels can decline by the markets moving sideways.
In conclusion, as stated yesterday, we continue to be of the opinion that the overall outlook for the equity markets is positive. However, we are not chasing price given the levels of the OB/OS Oscillators and valuation. We prefer buying on weakness near support.
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