Data & Charts Giving Mixed SignalsOpinion
All of the indexes closed slightly higher yesterday with positive internals as volumes dropped from the prior session. No technical events of note occurred on the charts as the gains were modest in nature. The data dashboard continues to send mixed signals regarding near term probabilities. As such, the weight of the evidence continues to suggest a “neutral” near term outlook for the major equity indexes while historically high valuation of the SPX keeps the intermediate term “neutral” as well. Insider selling and chart extensions above their 50 DMAs need to be considered as well.
- On the charts, all of the indexes closed modestly higher yesterday with positive internals but volumes slipped notably below recent levels. No technical events of note occurred as the SPX (page 2), DJI (page 2) and COMPQX (page 3) remain above their short term uptrend lines while the rest of the indexes violated said trend lines last week and are now neutral. Some points of concern remain with the degree that price is extended well above the respective 50 DMAs, as discussed in recent comments, along with the VIX back at its year lows suggesting the potential for an increase in market volatility usually associated with price weakness. However, more negative price action on the charts would be required to actually turn the picture negative.
- The data is a mixed bag yielding no consensus as to near term direction. All of the McClellan OB/OS Oscillators are neutral with the exception of the overbought 21 day NYSE level (All Exchange:+5.99/+41.42 NYSE:+20.48/+56.05 NASDAQ:+4.03/36.75). The OEX Put/Call Ratio (smart money) finds the pros neutral at 1.06 while the Total and Equity Put/Call Ratios (contrary indicators) see the crowd leaning to puts at 1.17 and 0.71. However, the Gambill Insider Buy/Sell Ratio at a bearish 7.3 still finds insiders actively selling the rally. So the data scales have no consensus at this point to suggest either positive or negative near term market action.
- In conclusion, there is nothing at present causing us to shift our short term outlook for the indexes form “neutral” as has been expressed by the market action over the past seven sessions. Extended forward valuation of the SPX at a 17.3 multiple keeps the intermediate term view “neutral”.