Near-Term Uptrends Remain Intact

Near-Term Uptrends Remain Intact

Some “Bearish Stochastic Crossovers” Generated

The indexes closed mixed Tuesday with half posting minor gains and half posting minor losses. Trading volumes were light. One index closed below its 50 DMA but all remain in short term uptrends. The data continues to send a generally neural forecast. As such, we are maintaining our near term “neutral/positive” outlook for the major equity indexes as the pause in the rally appears to us to be a normal consolidation post some of the large cap indexes making new all-time highs.

On the charts, the indexes closed mixed yesterday with negative internals on the NYSE while the NASDAQ’s internals were mixed with negative breadth but positive up/down volume. Overall trading volumes continued to shrink as has been the case just prior to the July 4th holiday period.

  • The SPX (page 2), COMPQX (page 3), NDX (page 3) and RTY (page 5) closed marginally higher while the DJI (page 2), DJT (page 4), MID (page 4) and VALAU (page 5) closed slightly lower.
  • The DJT did close below its 50 DMA but remains in a short term uptrend while the DJI, MID and VALUA flashed “bearish stochastic crossover” signals.
  • However, no trends or support levels were violated.
  • The cumulative advance/decline lines remain positive on the All Exchange and NYSE with the NASDAQ’s neutral.
  • High “volume at price” (VAP) levels are supportive on all but the DJT and VALUA where we view them as resistant.

The data remains largely neutral.

  • The 1 day McClellan OB/OS Oscillators are all neutral (All Exchange:+12.21 NYSE:+9.09 NASDAQ:+16.91).
  • The detrended Rydex Ratio (contrary indicator) at +0.48 is neutral as is the Open Insider Buy/sell Ratio (60.2).
  • The % of SPX stocks above their 50 DMAs (75.8) is also neutral.
  • Tuesday’s AAII Bear/Bull Ratio (contrary indicator) at 32.0/30.33 is neutral as well. We continue to view this lack of enthusiasm on the part of the crowd as a positive.
  • The 12 month forward consensus earnings estimate from Bloomberg for the SPX stands at $174.07, leaving the forward p/e at a 17.1 multiple while the “rule of twenty” finds fair value at 18.0, suggesting the SPX remains slightly undervalued at current levels.
  • The 10 Year Treasury yield is 2.05%.
  • The earnings yield stands at 5.84%.

In conclusion, we are maintaining our near term “neutral/positive” outlook for the major equity indexes given the current state of the charts and data that suggests the recent pause may be a normal consolidation after some new all-time highs being achieved.

  • SPX: 2,927/NA
  • DJI: 26,667/NA
  • Nasdaq: 7,974/8,164
  • NDX: 7,677/7,841
  • DJT: 10,306/10,499
  • MID: 1,921/1,9870
  • Russell: 1,500/1,560
  • VALUA: 6,144/6,298

Near-Term Uptrends Remain Intact

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