Guy S. Ortmann, CMT | May 23, 2022 09:05AM ET
All the major equity indexes closed lower but managed to close well above their intraday lows that left their near-term support levels—that had been violated on an intraday basis—intact.
Nonetheless, all the charts remain in near-term downtrends and lacking technical evidence of imminent reversals to the positive. However, the counterbalancing data continues to suggest to us that some internal pressure is building for a rally that could prove notable, given the historically high levels of bearish sentiment that have usually presaged upside market moves.
This, while the SPX forward valuation is trading at a discount to fair value, something not seen in several months. As such, we are still sticking our neck out with our assumption that a turning tide based on sentiment and valuation is becoming more probable.
On the charts, all the major equity indexes closed lower Friday but well above their intraday lows due to significant buying in the last hour of trade. Importantly, in our opinion, the late day surge pushed all the charts back above support, all of which had been violated on an intraday basis.
We are of the opinion that the last hour of trade in the markets is telling as it is more rational in thought than early session action. However, all the indexes remain in near-term downtrends with no signs of reversal.
Cumulative market breadth was unchanged and neutral for the All Exchange, NYSE and NASDAQ. Some stochastic levels are oversold but no bullish crossovers have been generated thus far.
In contrast, we continue to believe the data is building upside pressure for the markets, especially regarding sentiment.
SPX: 3,910/4,045 DJI: 31,137/32,000 COMPQX: 11,363/11,905 NDX: 11,810/12,496
DJT: 13,107/14,272 MID: 2,337/2,439 RTY: 1,755/1,855 VALUA: 8,378/8,551
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