NYSE: Sideways Patterns Continue
Guy S. Ortmann, CMT | Apr 12, 2016 08:37AM ET
Opinion: All of the indexes closed lower yesterday with the one exception of the VALUA posting a fractional gain. All closed at or near their intraday lows and unable to maintain their early session gains. Internals were positive on the NYSE and negative on the NASDAQ as volumes remained modest on both. No technical events occurred on the indexes as their recent sideways patterns persist. However, the U.S. Dollar broke below a long term support level that may be of some real import. The data remains largely neutral as well. Thus our near and intermediate term outlooks remain “neutral” until the weight of the evidence suggests otherwise.
- On the charts, all of the indexes closed lower except the VALUA (page 5) that managed to close fractionally higher. Internals were mixed as volumes remained modest, thus leaving all of the current sideways patterns intact. No technical events of import occurred on the indexes. However, a potentially significant event occurred on the U.S. Dollar chart as measured by the UUP ETF (page 9).
- As has been discussed in these notes of late, we were of the opinion that the UUP was in the process of possibly completing a long term topping formation. We believe that event has now occurred as one can see on the chart the break below long term support as of yesterday’s close. While the short term downtrend of the UUP has been ongoing for several weeks and may have formed a “hammer” yesterday suggestive of a short term bounce, we are of the opinion that the support break implies the potential for notable Dollar weakness over the intermediate term. Given the historic inverse relationship between the Dollar and commodity prices, commodities may benefit nicely from the current setup.
- On the data, all of the 1 day McClellan OB/OS Oscillators remain neutral as do most of the other data points. The outliers are a very bearish 3.01 OEX Put/Call Ratio (smart money) showing the pros extremely weighted in puts that is being counterbalanced by the WST Ratio and its Composite that are both bullish at 17.3 and 87.1.
- In conclusion, our near term outlook remains neutral due to the current state of the data and charts while the intermediate term is also “neutral” as valuation issues are beginning to temper that outlook. We are bearish on the U.S. Dollar.
- Forward 12 month earnings estimates for the SPX from IBES of $122.64 leave a 6.01% forward earnings yield on a 16.7 forward multiple.
SPX: 2,025/2,076
DJI: 17,438/17,859
COMPQX; 4,775/4,924
DJT: 7,604/7,937
MID: 1,405/1,451
RUT: 1,065/1,120
VALUA: 4,385/4,552
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