DJT Fails To Rally
Opinion: Yesterday’s rather dull action left the charts and data little changed. Some short term cautionary signals remain while the charts continue to consolidate with some slight downward bias. As such, although not extreme, our evaluation of the evidence continues to imply some downside risk for the major equity indexes over the short term.
- On the charts, there is little to note as the result of yesterday’s fractional moves. The SPX (page 2), DJI (Page 2) and DJT (page 3) remain below their recently violated short term uptrend lines. Our only other comment would be the fact that, during yesterday’s trade, the DJT was the only index to post a loss for the day. Yes, the loss was minimal and not of any major technical consequence. However, as we have stated several times in the past, it is our observation that the DJT has been the leading directional index over the past several months. So although yesterday’s action in the DJT was minimal, its weakness does slightly tilt the scales to the negative, in our opinion, for the whole.
- Regarding the data, while the 1 day McClellan OB/OS Oscillators are neutral for the NYSE (-17.436) and NASDAQ (+22.91), the 21 day levels are in the bearish range at +78.09 and +54.68 respectively. Meanwhile, the pros as measured by the OEX Put/Call Ratio (smart money) remain loaded up on puts at 1.62 as they continue to expect market weakness while the crowd is actively buying calls with a .48 Equity Put/Call Ratio (contrary indicator). For the most part, the balance of the data remains neutral with no bullish signals being given.
- So once again we come to the conclusion that, based on the charts and data, that there is some slight downside bias probable over the near term for the major equity indexes.
- For the longer term, we remain bullish on equities as they remain undervalued with a 6.45 forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $125.01 versus the 10 Year Treasury yield of 2.6%.