McClellan 1-Day OB/OS NeutralOpinion
All of the indexes closed lower yesterday with negative internals on the NYSE and NASDAQ as volumes rose notably from the prior session. The large cap indexes broke support on the charts, turning their near term trends negative, with the mid and small caps holding support levels. Cumulative breadth has deteriorated as well. The data is mostly neutral. Thus, given the fact that we do not see any strong indications from the charts or data that a bottom has been achieved, we are altering our near term outlook from “neutral/positive” to “neutral/negative”.
- On the charts, all of the indexes closed lower yesterday with broadly negative internals on strong trading volumes. All closed near the lower end of their intraday ranges. Support levels, adjusted below, were broken on the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (page 3). The DJT (page 4) closed below its short turn uptrend line, turning its trend to neutral as well as its 50 DMA. The VALUA (page 5) also closed below its uptrend line, turning the trend to neutral while the MID (page 4) closed below its 50 DMA. The cumulative advance/decline lines are now negative for the All Exchange, NYSE and NASDAQ with the NASDAQ’s below its 50 DMA. So we now find the large cap indexes, with the exception of the DJT, in short term downtrends with the mid and small caps neutral. Unfortunately, all of the stochastic readings remain neutral and have yet to reach oversold conditions that would suggest a bounce.
- Most of the important data remains neutral including all of the McClellan OB/OS Oscillators (All Exchange:-29.46/+24.81 NYSE:-31.5/+38.69 NASDAQ:-29.26/+14.24). Like the stochastic readings, they have yet to reach oversold conditions suggestive of a bounce. The Equity Put/Call Ratio (0.68) and OpenInsider Buy/Sell Ratio (39.3) remain neutral while OEX Put/Call Ratio at very bullish 0.38 finds the pros have increased their call exposure with the Total P/C (contrary indicator) finding the crowd very long puts at a bullish 1.04.
- In conclusion, the extent of yesterday’s damage to the charts combined with a lack of bottoming signals from the stochastic and OB/OS readings is sufficient to change our near term view to “neural/negative”. Violations of resistance and downtrends will be needed to become more positive.
- Forward 12-month earnings estimates for the SPX from Bloomberg are $161.09 leaving a 6.1% forward earnings yield on a 16.4 forward multiple versus the “rule of 20” implied fair value at 17.0.
- SPX: 2,613/2,683
- DJI: 23,934/24,690
- NASDAQ: 6,959/7,177
- NDX: 6,459/6,700
- DJT: 10,391/10,788
- MID: 1,887/1,928
- Russell: 1,545/1,595
- VALUA: 6,045/6,256