McClellan 1 Day OB/OS Oscillators Overbought
Opinion: All of the indexes closed higher Friday with positive internals on the NYSE and NASDAQ as NYSE volumes rose while NASDAQ volumes dipped. Several improvements were registered on the charts but still leave them bifurcated regarding performance. And as a result of last week’s strength, the McClellan 1 day OB/OS Oscillators are now overbought suggesting some possible stall/retracement over the near term. Valuation remains extended as does margin exposure and investment advisor complacency that continue to be of concern.
- On the charts, all of the indexes closed higher Friday with positive internals on the NYSE and NASDAQ. The COMPQX (page 3) made a new closing high while the SPX (page 2), MID (page 4) and VALUA (page 5) closed above near term resistance with the RTY (page 4) and VALUA (page 5) closing above their 50 DMAs. Yet with all of these improvements, the indexes remain quite split in terms of performance. The SPX, DJI and COMPQX technical trends remain bullish while the rest of the indexes remain well below their respective highs as they struggle to regain prior levels. This notable bifurcation continues to keep us in our quandary regarding overall market health. We would also note the stochastic levels for the SPX, COMPQX, MID and VALUA are now overbought.
- The data is mostly neutral with the exception of the McClellan 1 day OB/OS Oscillators are overbought and implying a potential stall or retracement of recent gains (All Exchange: +73.31/+11.98 NYSE:+69.86/+16.65 NASDAQ:+78.5/+9.57). All of the 21 day levels are neutral as are the Total (0.83, Equity (0.56) and OEX (1.2) Put/Call Ratios. The Open Insider Buy/Sell Ratio (47.1) and AAII Bear/Bull Ratio (34.0/31.67) are neutral as well. Advisor complacency persists with a 18.3/48.1 Investors Intelligence Bear/Bull Ratio (contrary indicator) while margin debt is 15.9% higher on a y/y basis and the SPX is at an 18X forward multiple.
- In conclusion, while we continue to be concerned due to high market valuation, margin debt, advisor complacency and split index performance, the large cap indexes have yet to flash important technical concerns that have gained traction while the very near term may see some weakness.
- Forward 12 month earnings estimates for the SPX from Bloomberg of $137.23 leave a 5.56 forward earnings yield on a 18.0 forward multiple, near a decade high.
SPX: 2,431/2,482
DJI: 21,640/22,019
NASDAQ: 6,300/NA
DJT: 9,118/9,422
MID: 1,713/1,745
RTY: 1,348/1,414
VALUA: 5,425/5,599