Charts Raise Two More Caution Flags

 | Jun 20, 2018 | 11:42 AM EDT
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No support levels or trends were violated on the charts Tuesday, although two indices gave off more cautionary signals. While the data is largely neutral, some of the indices continue to appear extended and possibly subject to vulnerability should we see a resumption of supply entering the markets.

Charts

All of the indices closed lower Tuesday with negative internals and higher trading volume. However, the morning showed the worst point of the session as most managed to close near their intraday trading highs.

Source: Worden

No technical support levels or short-term trends were violated, leaving the S&P 500 (see above) and Dow Jones Industrial Average neutral with the rest positive. Yet two more notes of caution were registered as the S&P 500 and Dow Transports (see below) both gave "bearish stochastic crossover" signals.

The DJIA, we would note, closed very near support. Any further degree of weakness could result in a break of said support.

Source: Worden

There was some shift in the cumulative advance/decline lines as the All Exchange and NYSE's are now neutral but above their 50-day moving averages. The NASDAQ A/D remains positive.

Data

In spite of the declines, all of the McClellan Overbought/Oversold Oscillators are neutral (All Exchange:+38.04/-15.12 NYSE:+49.24/-17.36 NASDAQ:+33.55/-10.2). The Equity P/C (0.59) and Total P/C (0.84) are also neutral while the OEX P/C (0.88) and Rydex Ratio (1.55) are counterbalancing with bullish and bearish signals, respectively.

The OpenInsider Buy/Sell Ratio remains neutral at 29.7 but shows no sign yet of a shift from their selling tendency of late. Sentiment, discussed here, remains a concern as it suggests complacency is dominating opinion.

Valuation

The S&P is near fair valuation based on the forward 12-month consensus earnings estimates from Bloomberg of $163.26 per share, with its P/E multiple of 16.9x comparing to the "rule of 20" implied fair value of 17.1x.

Our Outlook

We are maintaining our near-term "neutral" outlook for the major equity indices due to the current state of the charts and data.

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