More Fractional New Closing Highs

Charts And Data Mixed

Opinion

The indexes closed mixed yesterday with some fractional new closing highs achieved with positive internals on the NYSE while NASDAQ internals were negative. Volumes declined on the NYSE advance as volumes rose on the NASDAQ decline. The charts are a mix of neutral and positive trends as the data is giving no consensus of near term market propensities at this time. While some uptrends remain intact, historically high valuation and what we see as a possible weakening of market breadth suggest to us that the markets should be approached with some degree of caution. It suggests any earnings disappointments will not be treated lightly, in our opinion.

• On the charts, the indexes closed mixed but well off of their intraday lows. The SPX (page 2), DJI (page 2) and MID (page 4) made new fractional closing highs as the rest of the indexes closed lower. Another index has joined the ranks of the DJT (page 4), MID (page 4) and RTY page 5) in shifting from a positive to a neutral trend in that of the NDX (page 3) as it closed below its short term uptrend line. The rest remain in their near term uptrends. Market internals remain mixed with the All Exchange cumulative advance/decline neutral, the NYSE A/D positive and the NASDAQ A/D negative. The analysis suggests the markets are becoming more selective as to who participates in advances.

• The data is mixed with most of the McClellan OB/OS Oscillators neutral with the one exception on the 21-day NYSE mildly overbought (All Exchange:-31.0/+41.29 NYSE:-19.47/+53.09 NASDAQ:-41.3/+35.8). The bullish signals of the Total (0.97) and Equity (0.7) Put/Call Ratios are counterbalanced by a bearish 1.81 OEX Put/Call Ratio. The Open Insider Buy/Sell Ratio remains in neutral territory at 40.9.

• In conclusion, given the forward SPX p/e based on forward 12-month earnings estimates from Bloomberg is at a 15 year high at an 18.7 multiple and market breadth is becoming a bit more suspect, we believe some degree of caution is now appropriate as any earnings disappointments are likely to be treated more harshly than would otherwise be the case.

• Forward 12-month earnings estimates for the SPX from Bloomberg of $136.79 leave a 5.43 forward earnings yield on a 18.7 forward multiple, a decade high.
• SPX: 2,508/NA
• DJI: 22,403/NA
• Nasdaq: 6,450/NA
• NDX: 5,994/NA
• DJT: 9,542/9,986
• MID: 1,740/NA
• Russell: 1,450/1,512
• VALUA: 5,646/5,843