Data Slightly Negative
Opinion: Friday’s action in the equity markets left the data and charts in essentially the same conditions as the prior session. The uptrends of all of the major indexes remain intact with some new closing highs while the data is primarily neutral with a slight skewing to the negative. As such, our near term outlook remains that the current uptrends should be respected but some slight downside risk currently exists.
- On the charts, volumes swelled Friday due to options expiration with positive breadth. All of the indexes closed higher with the SPX (page 2) DJI (page 2) and the MID (page 4) making new closing highs. The NASDAQ (page 3) made a new 13 year closing high. The stochastic levels are overbought across the board but no actual signals have been triggered. The current short term uptrends for the indexes remain intact and should continue to be respected until proven otherwise, in our opinion.
- The data remains primarily neutral with a few cautionary signals. The WST Ratio and its Composite remain bearish at +70.04 and 175.0 respectively. While the 1 day McClellan OB/OS Oscillators remain neutral for the NYSE (+24.05) and NASDAQ (+46.56), the 21 day levels are overbought at +91.41 and +66.47 respectively. Finally, the OEX Put/Call Ratio (smart money) 1 day is a neutral 1.03 with a very bearish 2.52 15 day as the Equity Put/Call Ratio (contrary indicator) shows the crowd as still overly buoyant at .52. The net data result is a slightly cautionary directive.
- In conclusion, as the chart trends continue upward, the data is slightly cautionary leaving us with the opinion that within a bullish environment, some degree of near term risk remains present.
- For the longer term, we remain bullish on equities as they remain undervalued with a 6.37 forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $125.06 versus the 10 Year Treasury yield of 2.62%.
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