Short-Term Trends Unchanged
Guy S. Ortmann, CMT | Mar 30, 2017 11:52AM ET
The indexes closed mixed yesterday with positive internals on the NYSE and NASDAQ as volumes declined on both exchanges. No technical events of import were registered on the charts although there was some improvement in cumulative breadth. The data remains mostly neutral while the put/call ratios are raising some yellow flags. As such, we are maintaining our near term “negative” outlook for the major equity indexes as the weight of the evidence has not shifted sufficiently to alter our view.
- On the charts, The DJI (page 2) and DJT (page 3) closed lower yesterday as the rest managed to post gains. While internals were positive on both exchanges, volumes were tepid. The only index chart improvement occurred on the VALUA (page 5) that closed back above its 50 DMA but remains in its short term downtrend as do the SPX(page 2), DJI (page 2), MID (page 4)and RTY (page 4). The COMPQX (page 3) and DJT (page 3) are in short term neutral trends. Both the SPX and COMPQX tested resistance but failed to violate. Some improvement was seen in cumulative breadth as the All Exchange and NTYSE A/Ds have turned positive while the NASDAQ A/D is neutral.
- The data finds all of the McClellan OB/OS Oscillators staying in their neutral ranges (All Exchange:+28.11/-2.4 NYSE:+4.8/-0.17 NASDAQ:+32.54/-5.16). However, some of the put/call ratios have raised yellow flags as the Equity Put/Call Ratio (contrary indicator) finds the crowd now long calls at 0.54 while the OEX Put/Call Ratio reveals the pros have raised their stake betting on weakness with an increase to 2.44. The Total Put/Call Ratio is a neutral 0.83. The rest of the data is largely neutral as well.
- In conclusion, we have yet to see enough of a shift in the evidence on the charts or data to alter our near term negative opinion on the major equity indexes. Insider selling during February at a six year high of $7.8B and margin interest at an all-time high of $513B are also worthy of note, in our view.
- Forward 12-month earnings estimates for the SPX from IBES of $133.07 leave a 5.64 forward earnings yield on a 17.7 forward multiple, near a decade high.
- SPX: 2,298/2,364
- DJI: 20,109/20,865
- Nasdaq: 5,795/5,895
- DJT: 8,906/9,101
- MID: 1,687/1,728
- Russell: 1,338/1,384
- VALUA: 5,331/5,441
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