Short-Term Outlook Remains “Neutral/Positive”
Guy S. Ortmann, CMT | Sep 30, 2016 10:22AM ET
Some Charts See Minor Deterioration
Opinion
Our next report will be Friday, October 7. All of the indexes closed lower yesterday with negative internals as volumes rose from the prior session. Most closed near their intraday trading lows. While some deterioration was seen on some of the charts, no support levels were violated. As such, their current mix of neutral and positive trends remains intact. The data has seen a shift that is becoming more encouraging for our near term outlook that remains “neutral/positive” while historically high forward valuation for the SPX keeps our intermediate term view at “neutral”.
- All of the indexes closed lower yesterday on elevated volumes with negative internals. Some chart weakness was seen in the following fashion. The SPX (page 2) closed back below its 50 DMA and short term uptrend line that had been surpassed in the prior session. The DJI (page 2) closed below its intermediate term uptrend line while the MID (page 4) closed below its 50 DMA and intermediate term uptrend line. As well, the VALUA (page 5) closed below its 50 DMA. However, what we believe to be of greater technical significance is no support levels were violated. The short term uptrends on the COMPQX (page 3) and RUT (page 4) remain intact as the rest remain in their sideways patterns. Breaks of support would be required, in our opinion, to become more cautious in our short term outlook.
- The data has become more encouraging, particularly in regard to market psychology. Yesterday’s drop pushed the WST Ratio/Composite to a bullish 23.5/98.1 along with the Total and Equity Put/Call Ratios (contrary indicators) as the crowd loaded up on puts to 1.04 and 0.74. The ISEE Call/Put Ratio (contrary indicator) turned bullish as well at -10.9. The recent AAII Bear/Bull Ratio (contrary indicator) also shows a sizable degree of fear within the crowd at 37.11/24.0. All of the McClellan OB/OS Oscillators are neutral (All Exchange:-27.51/+9.8 NYSE:-24.44/+15.84 NASDAQ:-32.85/+5.14) as is the Gambill Insider Buy/Sell Ratio at 14.2. Only the OEX Put/Call Ratio is cautionary at 1.61 as the pros have extended their put exposure. So the data overview has, in our opinion, become more encouraging and suggestive of some possible near term lift for the indexes.
- In conclusion, we believe the charts and data continue to suggest a near term “neutral/positive” outlook for the major indexes while our intermediate term view remains “neutral”.
- Forward 12-month earnings estimates for the SPX from IBES of $127.70 leave a 5.94 forward earnings yield on a 16.8 forward multiple.
- SPX: 2,138/2,187
- DJI: 18,078/18,515
- NASDAQ: 5,221/NA
- DJT: 7,744/8,019
- MID: 1,526/1,573
- Russell: 1,227/NA
- VALUA: 4,848/5,002
Short-Term Outlook Remains “Neutral/Positive”
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