DJIA Trend Turns Positive After Breaking Through Resistance

 | Sep 14, 2018 | 10:47 AM EDT
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Break on through. To the positive side.

There was one important change on the charts of the major equity indices Thursday: the Dow Jones Industrial Average (see below) closed above its near-term resistance levels.

Why is that important?

It turned the index's near-term trend to positive from neutral.

Source: Worden

All of the indices closed higher Thursday except for the Dow Jones Transports and Russell 2000, which both dropped on the session. Internals were positive but on lighter trading volume than the previous session.

Near-term trends find the DJIA, S&P MidCap 400 and Dow Transports (see below) in short-term uptrends with the rest neutral.

Source: Worden

The cumulative advance/decline lines remain unchanged with the All Exchange and NYSE neutral and the NASDAQ negative. All of the cumulative A/Ds are still above their 50-day moving averages.

Data

The data is still largely neutral including all of the McClellan Overbought/Oversold Oscillators (All Exchange:-20.92/+22.5 NYSE:-18.5/+32.21 NASDAQ:-26.12/+15.72).

The Total Put/Call Ratio (0.84) and Open Insider Buy/Sell Ratio (55.9) are also neutral while the Equity P/C (contrary indicator) has turned bearish at 0.5 with the crowd long calls as the pros, measured by the OEX Put/Call Ratio, now expect weakness having now loaded up on puts at 2.96.

Valuation

The S&P 500 is now trading at a forward P/E multiple of 17.x consensus 12 month earnings estimates of $169.04 per share, versus the "rule of 20" implied fair value multiple of 17.0x. The "earnings yield" stands at 5.82%.

Our Outlook

There has not yet been enough of a shift in the evidence from the charts and data to cause us to alter our near-term "neutral/positive" outlook for the major equity indices.

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