Thursday, March 30, 2023

Positive Day Leaves Most Charts Neutral


The major equity indexes closed higher Tuesday with positive internals on the and as trading volumes declined form those of the prior session. However, two of the large-cap indexes gave up the bulk of their intraday gains, closing at or near their intraday lows. No significant technical events were registered on the charts although one more index generated a bearish stochastic crossover signal. Meanwhile, the data remains generally neutral as well with the exceptions of some of the psychology data while valuation continues to appear extended. As such, we are maintaining our near-term “neutral” outlook for the equity markets for nowOn the charts, all the major equity indexes closed higher yesterday with positive internals but on lighter trade.

  • No violations of trend or resistance were generated.
  • However, the SPX (page 2) and DJI (page 2) closed near their intraday lows after giving up the bulk of their gains earlier in the session as the rest closed near their midpoints.
  • All the indexes, in our opinion are in near-term neutral trends with the exceptions of the DJT (page 4) and VALUA (page 5) staying positive.
  • While breadth was positive, it was not sufficient to alter the current negative trends for the cumulative advance/decline lines on the All Exchange, NYSE and NASDAQ.
  • The DJT did create a bearish stochastic crossover signal that now leaves only the MID and VALUA failing to do so over the past week.

The data remains generally neutral.

  • The 1-day McClellan OB/OS Oscillators continue their neutral message (All Exchange: -4.21 NYSE: -4.0 NASDAQ: -5.37).
  • Psychology is still of some concern, in our opinion, as the Open Insider Buy/Sell Ratio (page 9) lifted to a neutral 34.2 while the Rydex Ratio (contrarian indicator) remains bearish with the leveraged ETF traders extended in their leveraged long exposure at a bearish 1.14 and this week’s Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) remaining bearish at 21.2/56.6. We continue to monitor the high levels of bullish opinions on the part of investment advisors and leveraged ETF traders as potential cautionary signals as they leave little room for disappointment on their part.
  • The valuation gap remains extended with the SPX forward multiple at 22.1 with consensus forward 12-month earnings estimates from Bloomberg at $156.04 while the “rule of 20” finds fair value at 19.2. Said valuation extension has been present for the past several months.
  • The SPX forward earnings yield is 4.53% with the Treasury yield rose to 0.8%.

In conclusion, we have yet to see enough evidence presented to alter our current near-term “neutral” outlook for the equity markets.

: HVS3,419/3,586

: HVS28,216/29,148

COMPQX: HVS11,367/12,065

NDX: HVS11,563/12,1962

DJT: 11,403/NA MID: 1,908/HVR2,007

RTY: HVS1,600/1,650 VALUA:


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