No Change In Short-Term TrendsOpinion
Our near term outlook for the major equity indexes remains “negative” based on the current state of the charts. The data is scattered across the spectrum yielding no near term directional probabilities. As well, valuation, advisor complacency, questionable market breadth and high use of margin debt add to our concerns.
- On the charts, all of the indexes closed fractionally higher yesterday with positive internals on the NYSE while the NASDAQ saw negative breadth but positive up/down volume. Trading volumes declined on both exchanges from the prior session. The only technical improvement was the VALUA (page 5) closing back above its 50 DMA. However, it remains in a short term downtrend as do all of the other indexes that have made a series of lower highs from the early March peaks with the exceptions of the COMPQX (page 3) and DJT (page 3) that are short term neutral. Cumulative A/Ds are neutral on the All Exchange, positive on the NYSE and negative on the NASDAQ.
- The data is a mixed bag. The bulk of the McClellan OB/OS Oscillators are neutral with the exception of the 21 NYSE being overbought (All Exchange:+8.84/+35.44 NYSE:+41.97/+64.88 NASDAQ:-8.11/+5.52). The Equity Put/Call Ratio is a neutral 0.62 but the OEX Put/Call ratio now finds the pros jumping the fence from heavy call exposure to very heavy put ownership at 2.84 as they expect weakness near term. The rest of the data is neutral.
- In conclusion, with the near term downtrends intact, market breadth in a questionable state, margin debt having increased 21% y/y, valuation extended as the SPX price/sales recently hit an all-time high of 1.93 and investment advisors complacent via a 18.3/55.8 Investors Intelligence Bear/Bull Ratio (contrary indicator), risk continues to outweigh reward over the near term, in our opinion. Thus we are maintaining our near term “negative” outlook for the major equity indexes.