Data Continues Largely Neutral Message
Opinion: All of the indexes closed higher yesterday with positive internals but volumes sagged from the prior session. The COMPQX managed to continue to improve its chart structure while some other indexes tested some upside restrictive levels. The data continues to have a largely neutral message. Thus, we remain “neutral/positive” for the near term while extended SPX forward valuation keeps our intermediate term view at “neutral”.
· On the charts, the COMPQX (page 3) followed on the heels of Friday’s strength by closing above its short term resistance level, adjusted below. Tests of barriers on some of the other indexes came in the form of the DJI closing at its intermediate term downtrend line while both the DJT (page 3) and MID (page 4) tested their short term downtrend lines. They were unable to violate on a closing basis but add encouragement to our speculation that said barriers have a reasonable probability of being overcome over the relatively near term. We would also note that all of the stochastic levels are near midpoints and not suggesting overbought conditions exist by that measure.
· The data still is sending its noncommittal and neutral message. All of the McClellan OB/OS Oscillators are neutral (All Exchange: -1.35/-25.76 NYSE:+7.03/-17.84 NASDAQ:-10.3/-31.82) as well as the WST Composite at 142.8, Equity Put/call Ratio (0.59) and Gambill Insider Buy/Sell Ratio (15.8). Only the OEX Put/Call Ratio (smart money) is negative as the pros have jumped the fence again and are now extremely weighted in puts at 4.7 and betting on weakness over the near term.
· In conclusion, we continue to be of the opinion that the combination of charts and data are still sending a “neutral/positive” message for the major indexes over the near term. The forward 12 month p/e for the SPX remains near historically high levels leaving our intermediate term view at “neutral”.
· Forward 12 month earnings estimates for the SPX from IBES of $128.87 leave a 6.0 forward earnings yield on a 16.7 forward multiple.
SPX: 2,120/2,171
DJI: 18,078/18,335
COMPQX; 5,223/5,327
DJT: 7,954/8,144
MID: 1,511/1,550
RUT: 1,211/1,238
VALUA: 4,812/4,968