While we suspect the markets have seen their correction lows, a significant amount of overhead supply needs to be overcome in order for us to become more positive in our near-term outlook. We believe some neutral sideways action may be required before violations of resistance can be achieved, thus leaving our outlook neutral for the short term.
All of the indices closed higher Tuesday with positive internals on the NYSE and Nasdaq as volumes declined from the prior session. One chart saw minor technical improvement, but the technical pictures of the rest are unchanged. The data has turned a bit more mixed resulting in a more neutral message.
On the charts, all of the indices remain in their short-term downtrends and below resistance levels. These levels need to be overcome for us to become more positive in our outlook, with one exception. The Nasdaq 100 (see below) did manage to close above its short-term downtrend line, changing its trend to neutral from negative. Also, the Nasdaq cumulative advance/decline line turned neutral from negative as well, joining the NYSE and All Exchange cumulative A/Ds in that condition.
Bullish stochastic crossovers were registered on all of the index charts, although they are not yet “actionable,” in our opinion. As such, we believe the indices are now likely to be in neutral sideways patterns until resistance levels can be overcome.
The data is now more mixed as all of the McClellan 1-Day OB/OS Oscillators have turned neutral with the 21-day levels staying oversold (All Exchange:-37.19/-63.26 NYSE:-39.83/-64.17 NASDAQ:-34.07/-58.87). The Total and Equity Put/Call Ratios (contrary indicators) are bullish at 0.96 and 0.73, respectfully, but are counterbalanced by a very bearish 3.01 OEX Put/Call Ratio as the pros have loaded up on puts.
Insider buying has picked up to a 61.7 OpenInsider Buy/Sell Ratio but remains neutral. Finally, forward consensus 12-month earnings estimates for the S&P 500 via Bloomberg stand at $157.36 leaving a 16.9x forward P/E multiple.