Some New Closing Highs AchievedOpinion
All of the indexes closed higher yesterday with two new closing highs achieved on some large cap indexes. Internals were positive with volumes slightly higher, but below average, on the NYSE and flat on the NASDAQ . No other technical events of import occurred on the charts while the data continues to send a mixture of signals regarding near term market projections. We continue to have a “neutral” view for the near term prospects of the major indexes based on current chart and data conditions while historically high forward valuation of the SPX keeps our intermediate term view “neutral” as well.
- All of the indexes closed higher yesterday with positive internals on fairly tepid trading volumes. The DJI (page 2) and COMPQX (page 3) made new closing highs. The short term uptrends for the SPX (page 2), DJI and COMPQX remain intact while the rest are sideways post their uptrend violations of last week. All remain extended above their 50 DMAS which remains a concern while the VIX (page 9) is at its year lows, suggesting the potential for some volatility reentering the markets.
- The data is little changed with all of the McClellan OB/OS Oscillators in neutral territory with the exception of the NYSE 21 day being overbought (All Exchange:+22.06/+47.44 NYSE:+35.88/+66.29 NASDAQ:+23.26/+43.32). The Equity Put/Call Ratio is a neutral 0.63 but the OEX Put/Call Ratio (smart money) now finds the pros very long puts at 2.62 and expecting weakness. Meanwhile, the Gambill Insider Buy/Sell Ratio still finds insiders aggressively selling stock into the rally at 7.3. While this casts some clouds over the data forecast, the rest of the data is not sufficiently negative to actually turn the data scales bearish, in our opinion.
- In conclusion, we remain “neutral” for the near term outlook with the caveats of extended price above the 50 DMAs on the charts, low VIX levels and insider selling activity. Chart breaks need to appear before a shift in opinion could be warranted. High forward SPX valuation keeps the intermediate term view “neutral”.
- Forward 12-month earnings estimates for the SPX from IBES of $131.02 leave a 5.79 forward earnings yield on a 17.3 forward multiple, a 12-year high.
- SPX: 2,199/NA
- DJI: 19,115/NA
- NASDAQ: 5,306/NA
- DJT: 9,041/9,381
- MID: 1,618/1,690
- Russell: 1,334/NA
- VALUA: 5,170/5,374