Uptrends Intact, but Stocks May Take a Quick Timeout

 | Sep 22, 2017 | 11:00 AM EDT
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All of the near-term trends remain positive on the charts as do the cumulative advance/decline lines, suggesting the trends should continue to be respected, until proven otherwise. However, the combination of valuation and stochastics may imply some slowing of momentum or partial retracement of recent gains over the short term. This would not be unusual given duration and magnitude of the recent rally.

The bulk of the indices closed lower Thursday, the one exception being the Dow Jones Transports, which advanced. Internals were negative on the NYSE and Nasdaq as volumes declined from the prior session on both exchanges.

On the charts, the only index to close higher yesterday was the Dow Transports (see below). The rest declined on negative internals but volumes dipped from the prior session. As such, all of the short-term uptrends for the indices remain intact while the cumulative advance/decline lines remain positive and above their 50-day moving averages as well.

Source: Worden

Technically speaking, one cautionary signal was registered as the Nasdaq Composite (see below) gave a bearish stochastic crossover signal. Yet said signals should be used for confirmation purposes. So although there may be some slowing of momentum, we would not consider this event significant unless the Nasdaq Composite closed below near-term support. All of the remaining stochastic levels are overbought.

Source: Worden

The data is largely neutral. The McClellan OB/OS Oscillator 1-day levels are neutral while the 21-day readings remain overbought (All Exchange:+28.13/+84.86 NYSE:+44.65/+77.81 NASDAQ:+36.01/+64.34). The Total (0.84), Equity (0.61) and OEX (1.02) Put/Call Ratios are all neutral as are the AAII Bear/Bull Ratio (32.0/31.67) and Investors Intelligence Bear/Bull Ratio (20.2/47.1). The Open Insider Buy/Sell Ratio also remains neutral at 40.0.

Forward 12-month earnings estimates for the S&P 500 from Bloomberg of $137.37 per share leave a 5.56% forward earnings yield on an 18.2x forward multiple, over a decade high.

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