Valuation Remains Near Prior PeakOpinion
The indexes closed mixed yesterday with positive internals on the NYSE while NASDAQ internals were mixed. Volumes were below prior levels on the NYSE with NASDAQ volumes flat. Some new closing highs were achieved on two of the large cap indexes while the indexes themselves are returning to more mixed performance as seen a few weeks ago. The data is almost entirely neutral while valuation is back to its prior recent peak. We believe valuation may now become a drag on the pace of further progress while the index charts should be respected on an individual basis given their current mixed status.
- On the charts, the indexes closed mixed yesterday with the SPX (page 2) and DJI (page 2) making new closing highs with the COMPQX (page 3), NDX (page 3) and VALUA (page 5) closing higher. The NDX closed above its short term resistance turning its short term trend back to positive from neutral as the rest of the indexes declined. We would note the NASDAQ advance came on negative breadth with the NASDAQ cumulative advance/decline line remaining negative and below its 50 DMA. The All Exchange A/D is neutral and above its 50 DMA with the NYSE A/D positive and above its 50 DMA. So all of the index short term trends are positive with the one exception of the RTY (page 5) being neutral. The differences among the exchange advance/decline lines are somewhat disturbing and will be watched closely.
- The data is neutral including all of the McClellan OB/OS Oscillators (All Exchange:-2.81/+28.47 NYSE:+10.56/+41.98 NASDAQ:-15.79/+20.28). The Equity (0.63), Total (0.82) and OEX (1.03) Put/Call Ratios are all neutral as well as are the Open Insider Buy/Sell Ratio (40.8) and new AAII Bear/Bull Ratio (31.33/35.33).
- In conclusion, as valuation has returned to its recent peak levels, we suspect the indexes may slow their pace of advance within their current uptrends. Yet said uptrends should still be respected, in our opinion, until proven otherwise. We would also note the mix of market breadth from positive to negative as discussed above has the potential to be problematic should it continue.