Cumulative Advance/Decline Lines Improve Opinion
Our next report will be issued on Monday, November 27th. The indexes closed mostly higher Monday with the one exception of the NDX. Internals were positive on the NYSE and NASDAQ as volumes declined from the prior session on both exchanges. Some new closing highs were achieved on the charts along with improvement in the cumulative advance/decline lines. The data is largely neutral. Thus with the recent improvement in valuation as well as market internals, near term concerns are lessening as we continue to recommend respecting the trends of the individual index charts on their own merits.
On the charts, only the NDX (page 3) closed lower yesterday as the rest posted advances. Internals were positive on both exchanges on lighter volume. There was further improvement in the participation by small and mid-cap issues discussed yesterday as the MID (page 4) and VALUA (page 5) closed above resistance to new closing highs while the RTY (page 5) closed above resistance but has one more hurdle to overcome regarding resistance. We have also seen improvement on the cumulative advance/decline lines as the All Exchange, NYSE and NASDAQ cumulative A/Ds have all turned short term positive and are back above their 50 DMAs. So the current indexes near term trends are now as follows: Positive: COMPQX, NDX, MID, VALUA Neutral: SPX, DJI, RTY Negative: DJT.
The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+11.46/-14.38 NYSE:+2.64/-9.16 NASDAQ:+20.0/-16.89). The Equity Put/Call Ratio (0.59), Open Insider Buy/Sell Ratio (39.4) and new AAII Bear/Bull Ratio (contrary indicator) at 28.67/39.67 are all neutral as well. The Total and OEX Put/Call Ratios are counterbalancing at 0.92 and 1.65 respectively.
In conclusion, the improvements in breadth, index charts and valuation are relieving some of our concerns. However, the markets do remain selective thus warranting the respecting of the individual index chart trends, in our opinion.
Forward 12-month earnings estimates for the SPX from Bloomberg of $140.60 leave a 5.46 forward earnings yield on a 18.4 forward multiple.