Data UnavailableOpinion
All of the equity indexes closed lower yesterday with very negative internals on the NYSE and NASDAQ as volumes rose from the prior session. Multiple charts broke support levels as well as their 50 DMAs, leaving all of them in their current short term downtrends. The data is unavailable this morning. Valuation has corrected for the SPX down to a 16.9 forward multiple. Yet until we start to see some action in the charts that would suggest a selling climax, we cannot assume the downdraft of recent days has been completed.
- On the charts, all of the indexes closed lower yesterday with broadly negative internals on heavy volume. All closed at or near their intraday lows. The SPX (page 2), DJI (page 2), COMPQX (page 3), DJT (page 4), MID (page 4) and VALUA (page 5) all closed below support and their 50 DMAs. The NDX (page 3) broke its 50 DMA as well with the RTY (page 5) breaking support. The cumulative advance/decline lines for the NYSE, NASDAQ and All Exchange remain negative and below their 50 DMAs. As such, all of the short term downtrends remain intact, lacking signals of a selling climax at this point. We would note new support levels for most of the indexes coincide with 50% Fibonacci retracements of all of the gains from March of last year.
- The data is unavailable. However, given the fact that all of the 1-day McClellan OB/OS Oscillators were in the -100 range yesterday, we suspect they are now at oversold levels not seen for quite some time. As well, we would not be surprised to find a shift in the sentiment indicators that had been of concern given the overly bullish sentiment on the part of investors to a less negative technical implication.
- Valuation has moderated significantly in the past week from a prior 18.7 forward multiple for the SPX based on consensus estimates from Bloomberg. It now stands at a 16.9 forward multiple as estimates have risen to $157.03 as the SPX has dropped over 220 points in the past week. One measuring method, known as the Rule of 20, suggests current fair value of the SPX would be a 17.2 multiple, above current levels.
- In conclusion, while we suspect the current selloff may prove to be a buying opportunity, until the charts suggest a climax of selling pressure, our near term outlook remains negative.