Guy S. Ortmann, CMT | Mar 23, 2022 09:18AM ET
All the major equity indexes closed higher Tuesday with positive internals on the NYSE and NASDAQ as trading volumes declined on both from the prior session. Some closed near their highs of the day as others closed near their midpoints.
Three of the indexes closed above resistance, leaving all in near-term uptrends and above their 50 DMAs. However, the nearly vertical nature of the recent rally is likely not sustainable, in our opinion.
While investor sentiment remains near historic levels of fear that we view as an eventually strong upside catalyst, some of the data is sending signals that some pause/consolidation of the recent notable gains would not be surprising, suggesting better buying opportunities may be in the offering in the not-too-distant future.
On the charts, all the major equity index charts closed higher yesterday with positive internals on lower volume for the NYSE and NASDAQ. While the indexes closed at various points of their intraday ranges, the SPX, COMPQX, and NDX closed above their resistance levels with the NDX also reclaiming its 50 DMA. Thus, all are in near-term uptrends an above their 50 DMAs. However, the near-term trends have become almost vertical in nature that are likely not sustainable, in our view.
Cumulative breadth remains positive for the All Exchange, NYSE and NASDAQ. Yet, the stochastic levels remain quite overbought on all and in the 90s. They have not yet generated bearish crossover signals that would raise some yellow flags. Also, the VIX has pulled back to support suggesting we may see some increase in volatility.
The data finds the McClellan 1-Day OB/OS oscillators overbought with the NASDAQ very overbought and still suggesting a pause/consolidation over the near term (All Exchange: +96.08 NYSE: +87.14 NASDAQ: +104.53).
In conclusion, we now find ourselves in a debate between the very encouraging sentiment data while the vertical market gains combined with the OB/OS, VIX and stochastic readings suggesting better buying opportunities may be seen in the not-too-distant future.
SPX: 4,384/4,530 DJI: 33,914/34,830 COMPQX: 13,700/14,147 NDX: 14,126/14,749
DJT: 15,745/16,585 MID: 2,642/2,717 RTY: 2,015/2,090 VALUA: 9,426/9,647
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