Bullish Equity Party Is Thinning Out

 | Jun 01, 2018 | 11:17 AM EDT
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The volatility experienced in the stock market this week has been notable. However, no violations of support or resistance have been registered on the charts and the data is inconclusive.

What we would note, however, as we scan close to 2,000 individual equity charts based on increased trading volume on a daily basis, is an increasingly selective market in terms of bullish participants.

Now let's take a closer look at the charts, data and valuation after Thursday's decline.

Charts

All of the indices closed lower Thursday with negative internals on the NYSE and NASDAQ as trading volumes surged. The indices continue their recent trend to ping-pong back and forth in wide swings.

While all closed at or near their intraday lows, no support levels were violated on a closing basis although the Dow Jones Industrial Average (see below) and Dow Transports closed very near said support levels.

Source: Worden

The Value Line Arithmetic Index closed back below its short-term uptrend line leaving only the Nasdaq Composite and Russell 2000 (see below) in near-term uptrends as the rest remain neutral.

Source: Bloomberg

The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50-day moving averages.

Data

The data is mostly neutral with a few conflicting signals. The bulk of the McClellan Overbought/Oversold Oscillators are back at neutral with the one exception of the NYSE 21-day that is mildly overbought (All Exchange: -0.19/+48.48 NYSE:+2.34/+54.09 NASDAQ:-3.35/+46.04).

The Equity Put/Call Ratio (0.63) and OpenInsider Buy/Sell Ratio (45.4) are neutral with the Total P/C (contrary indicator) a bullish 1.13 counterbalanced by the pros remaining bearish and long puts with a 1.5 OEX P/C.

Valuation

Valuation finds the forward P/E multiple for the S&P 500 based on 12-month consensus earnings estimates from Bloomberg of $163.14 per share at 16.6x versus the "rule of 20" implied fair value of 17.2x.

Near-Term Outlook

We see no new evidence being presented to cause a change in our current near term "neutral" outlook for the major equity indices.

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