Data Remains Mixed
The indexes closed mixed Monday with mixed internals on the NYSE and positive internals on the NASDAQ. Trading volumes rose on the NYSE while those on the NASDAQ declined from the prior session. While all of the chart uptrends remain intact, there are a few issues starting to nag us regarding the near term outlook which, at this point, remains “positive”. The data has turned a bit more mixed as well. Below is a discussion of the reasons for our increased vigilance.
- On the charts, the indexes closed evenly split between gainers and losers with the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (page 3) posting gains as the rest declined. The COMPQX did manage to close above resistance. While no support levels or uptrend lines were violated, the fact that the indexes gapped up but proceed to pull back to their lows of the day is a bit disturbing as it occurred within a protracted rally (The DJI is up 4,300 points from its December low with the SPX up 19%.) suggesting the possible weakening of demand. Should the indexes gap open lower today and post losses, they would construct an “evening star” candlestick pattern that is sometimes found near the end of a rally. However, at this point no sell signals have emerged. The cumulative advance/decline lines fort the All Exchange, NYSE and NASDAQ remain positive.
- The data remains mixed with the 1 day McClellan OB/OS Oscillators dropping back to neutral (All Exchange:+43.26/+102.98 NYSE:+39.36/+123.37 NASDAQ:+47.3/+86.63). The detrended Rydex Ratio (0.42) and new AAII Bear/Bull Ratio (24.0/37.67) are neutral as well. However, the Open Insider Buy/Sell Ratio is a cautionary 21.6 as insiders continue selling while the OEX Put/Call Ratio (2.58) finds the pros heavy in puts. The % of SPX stocks trading above their 50 DMAs remains near peak levels as well at 90.5. The spread between the forward p/e for the SPX based on consensus estimates from Bloomberg at $167.54 versus the “rule of twenty” has now shrunk to 16.7 versus 17.3. While positive, it is much closer to fair value as estimates have been declining while the SPX has risen.
- In conclusion, we have yet to see any sell signals on the charts with the uptrends staying intact, thus causing us to keep our “positive” near term outlook in place. However, the issues discussed above are causing us to heighten our vigilance.
- SPX: 2,723/2,796
- DJI: 25,542/26.370
- Nasdaq: 7,404/7,575
- NDX: 7,000/7,206
- DJT: 10,298/10,675
- MID: 1,898/1,956
- Russell: 1,546/1,587
- VALUA: 6,135/6,330