Forecast for Stocks Brightens as Charts Show Improvement

 | Apr 27, 2018 | 10:27 AM EDT
  • Comment
  • Print Print
  • Print

What a difference a day makes.

Enough positives happened Thursday on the charts to alter our short-term expectations to a more positive stance. Let's break down the current state of the index charts, data and valuations to see where we stand.

Charts

Source: Worden

The only index to close lower Thursday was the Dow Transports, which also closed back below its 50-day moving average. The rest closed higher and at the mid-to-upper end of their intraday ranges. The gains came on positive breadth and higher volume, adding some credibility to the move.

Both the Nasdaq Composite (above) and Nasdaq 100 (below) managed to close above their short-term downtrend lines while the S&P MidCap 400 Index closed back above its 50 DMA. So, we now find all of the indices, with the exception of the S&P 500 and Dow Jones Industrial Average that remain in short-term downtrends, in neutral sideways patterns.

Source: Worden

Breadth also finds the cumulative the advance/decline lines for the All Exchange, NYSE and NASDAQ turning neutral from negative. The dominance of neutral sideways patterns plus the improvement in breadth are largely the cause of the change in our short-term outlook.

Data

The bulk of the data is neutral, including all of the McClellan Overbought/Oversold Oscillators (All Exchange:-11.66/+28.41 NYSE:-8.81/+39.57 NASDAQ:-15.04/+19.99). The Equity (0.61) and Total (0.82) Put/Call Ratios are neutral as well as is the OpenInsider Buy/Sell Ratio at 45.3.

The OEX Put/Call Ratio is offering some encouragement as the pros remain very long calls at 0.51 as they expect near-term strength to continue.

Valuation

The forward 12-month P/E multiple for the S&P 500 based on 12-month consensus earnings estimates from Bloomberg of $161.47 per share is 16.5x, versus the "rule of 20" implied fair value of 17.0x.

All in all, the dominance of neutral patterns on the index charts with improved breadth and generally neutral data are, in our opinion, sufficient to change our near-term view to "neutral" from "neutral/negative."

Columnist Conversations

We are very close to a trigger for entry in BIDU against one of the standout zones discussed in Monday's artic...
Red Robin (RRGB) getting pounded by 17% after seeing its first quarter same-store sales 0.9%. Hey, it's tough...
Just touched down for a week of meetings in San Francisco (tech companies of course). Read an interesting arti...
Paypal's Dan Shulman was interviewed by Jim Cramer at the 'teachin' bootcamp on May 5.  I was in attendan...

BEST IDEAS

REAL MONEY'S BEST IDEAS

News Breaks

Powered by
Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.