• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

This Market Is Oversold, but We Are Still Cautious

The indices are facing significant overhead resistance, right now.
By GUY ORTMANN
Jun 03, 2019 | 10:39 AM EDT

The indices are still in downtrends while the data is split between neutral and positive readings. We haven't seen enough of a shift to alter our near-term "neutral/negative" outlook.

On the Charts

All of the indices closed lower Friday, with most closing at or near their intraday lows. Volumes rose on both exchanges, and they had negative internals. The indices also closed below near-term support and are still in downtrends and below their high "volume at price" (VAP) levels -- suggesting significant overhead resistance. The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain negative and below their 50-day moving averages and stochastic readings are oversold -- none have as yet triggered bullish crossover signals.

Data Is Still Mixed

The data remains mixed. The one-day McClellan Overbought/Oversold Oscillators are still oversold (All Exchange:-88.09; NYSE:-89.54; Nasdaq:-91.3). The detrended Rydex Ratio (-0.38), Open Insider Buy/Sell Ratio (91.8) and percentage of SPX stocks above their 50 DMAs (28.1) are all neutral.

Crowd sentiment was neutral last week, with the AAII Bear/Bull Ratio at 32.67/32.0. But the Investors Intelligence Bear/Bull Ratio (contrary indicator) was negative at 17.2/49.5, suggesting advisors remain overly bullish. We would not be surprised to see more of a shift with the release of the new data tomorrow morning.

Valuation

The S&P 500 is trading at a forward P/E multiple of 16.1x consensus 12-month earnings estimates from Bloomberg that have dipped to $171.19 per share, while the "rule of twenty" fair value multiple is 17.9x, suggesting the S&P is undervalued. Of course, that is assuming the estimates will hold. The shift in valuation has largely been due to the notable drop in the 10-year Treasury yield -- to 2.14%.

The earnings yield stands at 6.22%.

Our Outlook

Although the OB/OS data remains oversold, everything else suggests we maintain our near-term "neutral/negative" outlook for the major equity indexes.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Ortmann had no positions in any securities mentioned.

TAGS: Indexes | Investing | Stocks | Technical Analysis | Trading | Value Investing | U.S. Equity

More from Stocks

To Be a Great Trader, Plan on Losing Money

James "Rev Shark" DePorre
Dec 14, 2019 10:00 AM EST

Losses are simply a function of the trading process and are not an indication of failure.

A Quiet Conclusion to a Dramatic and Contentious Issue

James "Rev Shark" DePorre
Dec 13, 2019 4:24 PM EST

This market has such a positive brew that has to make you at least a little apprehensive.

Put These 2 Stocks on Your Radar for the Week Ahead

Timothy Collins
Dec 13, 2019 1:00 PM EST

While both have 'Technologies' in their name, they don't share the same space.

My Trade Idea for Oracle

Stephen Guilfoyle
Dec 13, 2019 12:30 PM EST

ORCL is competing for the business to business cloud, obviously a tough space.

When You're Wrong, You're Wrong

Guy Ortmann
Dec 13, 2019 12:08 PM EST

We are upgrading our near-term market outlook.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:10 AM EST BOB LANG

    Banking a Big Winner in SRPT, Rolling Up

    Nov. 20 here on the CC, I mentioned buying some Ma...
  • 10:36 AM EST GARY BERMAN

    Fibocall: How High Can Crude Go?

    On crude: I am looking for higher, but please b...
  • 08:20 AM EST BOB LANG

    Webinar Time - Talkin' Calendars, Butterflys

    join me later today after the market close as we t...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2019 TheStreet, Inc., 14 Wall Street, 15th Fl, NY, NY 10005

Need Help? Contact Customer Service

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.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login