More Support Levels Break
Guy S. Ortmann, CMT | Mar 11, 2019 11:09AM ET
Near-Term Outlook Remains “Neutral”
All of the indexes closed lower Friday with negative internals on the NYSE and NASDAQ as volumes declined from the prior session. While the bulk of the indexes managed to close near their intraday highs, three more indexes closed below support, turning their near term trends negative. However, one index chart may be forming a short term bottom. The data is now a mix of neutral and positive signals. So when all of the evidence is put on the scales, we end up maintaining our near term “neutral” outlook for the major equity indexes at this time.
On the charts, all of the indexes closed lower Friday with negative internals on lighter volume. Most managed to see end of the day strength bringing them near their intraday highs.
- Nonetheless, the SPX (page 2), COMPQX (page 3) and MID (page 4) closed below their support levels and are now in negative trends as is the DJT (page 4).
- However, the DJT chart formed a “hammer” formation as noted on the chart, suggesting it may have made a near term bottom.
- The rest of the indexes are neutral. We do find the stochastic levels quite oversold but no bullish crossovers have appeared yet that would suggest some relief is under way.
The data remains a mix of neutral and positive readings with the 1 day McClellan OB/OS Oscillators remaining oversold (All Exchange:-94.53 NYSE:-99.58 NASDAQ:-93.63) and suggesting a possible bounce. Yet while they are encouraging, they are capable of getting more oversold.
- The Open Insider Buy/Sell Ratio is a neutral 35.6 as is the detrended Rydex Ratio at 0.37.
- Valuation finds the spread between the forward p/e for the SPX based on Bloomberg forward 12 month consensus earnings estimates of $167.50 versus the “rule of 20” fair valuation at 16.4 versus 17.4, suggesting the market is currently somewhat undervalued. However, a narrowing of the spread has occurred over the past several weeks as estimates have declined with issuers generally cutting back their projections during the recent earnings season as the SPX rose in price. While still comparatively undervalued, it is much less so than a few weeks ago.
In conclusion, when we take an overview of the charts and data, including the bullish oversold stochastic and oscillator levels, we are inclined to maintain our near term “neutral” outlook for the major equity indexes.
- SPX: 2,719/2,770
- DJI: 25,455/25,816
- Nasdaq: 7,298/7,501
- NDX: 7,008/7,110
- DJT: 10,047/10,436
- MID: 1,839/1,908
- Russell: 1,520/1,567
- VALUA: 6,045/6,226
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