NYSE: All Indexes Close Above Resistance

Data Turns Slightly Cautionary

Opinion: All of the indexes closed higher yesterday with positive internals as volumes rose from the prior session. All closed at or near their intraday highs with all of the indexes closing above their prior resistance levels. However, we now find the data taking on a slightly cautionary tone as a result of recent strength. Yet the data is not at extreme levels. Thus, while the pace of progress may temper over the near term, the combination of the charts and data now suggest a “neutral/positive” near term outlook. The intermediate term remains “neutral” largely due to valuation that continues to press toward historically high levels although breadth remains very positive.

• On the charts, all of the indexes closed higher yesterday on healthy volumes and good breadth. At the close, every index (pages 2-5) had managed to close above its respective short term resistance level, thus breaking positive from the prior sideways patterns. The DJT (page 3) also closed above its 200 DMA. None of the stochastic readings are overbought at present. As well, the A/D lines for all of the exchanges hit higher highs as breadth continues to improve. So the charts are in good shape.

• The data has turned slightly cautionary as the All Exchange and NYSE 1 day McClellan OB/OS Oscillators are mildly overbought at +50.08 and +54.85 respectively. The NASDAQ 1 day remains neutral at +45.54. Both the WST Ratio and its Composite are now bearish at 72.2 and 161.5 adding a little more weight to the cautious side of the scale. However, the OEX Put/Call Ratio (smart money) finds the pros neutrally weighted in puts and calls at 1.3. As such, the data has darkened a bit but not to levels of high alert. They may simply imply a dampening of upward progress.

• In conclusion, our near term outlook has turned “neutral/positive” as a result of the violations of resistance on the charts although the data is beginning to suggest some degree of tempered enthusiasm. Forward valuation remains a bit stretched leaving us “neutral” for the more intermediate term outlook although breadth remains quite positive.

• Forward 12 month earnings estimates for the SPX from IBES of $123.79 leave a 5.94% forward earnings yield on a 16.8 forward multiple.

SPX: 2,061/2,094

DJI: 17,541/8,114

COMPQX; 4,836/5,001

DJT: 7,692/8,073

MID: 1,423/1,473

RUT: 1,093/1,146

VALUA: 4,437/4,624

Morning Technical Note

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Written By: Guy S. Ortmann, CMT