Indexes Close Mixed

McClellan 1 Day OB/OS Oscillators Remain Oversold

Opinion

The indexes closed mixed Wednesday with most of the large cap indexes moving higher while the mid and small caps declined, resulting in some technical deterioration. Internals were positive on the NYSE with NASDAQ internals showing a negative advance/decline but positive up/down volume. Volumes increased from the prior session on both exchanges. The data remains generally positive, in our view, and continues to imply some relief from the recent weakness over the near term. However, the weight of the evidence has shifted to a more neutral outlook for the near term versus our prior opinion that the prior uptrends, which are now generally violated, were to be respected. Forward 12 month consensus earnings estimates for the SPX rose to $155.00.

• On the charts, the SPX (page 2), DJI (page 2), COMPQX (page 3), NDX (page 3) and DJT (page 4) closed higher yesterday but the COMPQX and NDX did flash bearish stochastic crossover signals. The MID (page 4), RTY (page 5) and VALUA (page 5) declined with the MID closing below its near term support and short term uptrend line while the VALUA closed below its short term uptrend line as well. Internals were slightly positive on the NYSE with the NASDAQ having negative breadth but positive up/down volume. So the charts have shifted from their prior uptrends to mostly neutral patterns. The DJI is the only index still in a near term uptrend. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are negative but above their 50 DMAs.

• The data still holds some hope for near term relief, in our opinion. The 1-day McClellan OB/OS Oscillators remain oversold with the 21-day levels neutral (All Exchange:-74.46/+11.74 NYSE:-83.87/+7.57 NASDAQ:-68.64/+20.61). The Total Put/Call Ratio (contrary indicator) is a mildly bullish 0.9 with the OEX Put/Call Ratio still finding the pros long calls and expecting relief at 0.8. The OpenInsider Buy/Sell Ratio is a neutral 33.3.

• We would note the forward valuation of the SPX has slipped from an 18.7 forward multiple just two days ago to 18.2 as forward 12-month consensus estimates have now been raised to $155.00. The dip in valuation may be a fundamental impetus for the data’s expectation of some near term relief. Nonetheless, the charts suggest a more neutral outlook is now appropriate for the near term, in our view.
• Forward 12-month earnings estimates for the SPX from Bloomberg were raised to $155.00, leaving a 5.5 forward earnings yield on a 18.2 forward multiple.
• SPX: 2,798/NA
• DJI: 25,950/NA
• NASDAQ: 7,217/NA
• NDX: 6,805/NA
• DJT: 10,582/11,203
• MID: 1,911/1,980
• Russell: 1,550/1,596
• VALUA: 6,270/NA