Options Data Turns PositiveOpinion
The bulk of the indexes closed lower yesterday with the exception of the DJI posting a fractional gain. Internals were negative on both the NYSE and NASDAQ as NYSE volumes dropped from the prior session while those on the NASDAQ rose. While the indexes managed to close well above their intraday lows, a couple of cautionary signals were registered on the charts as breadth remains a concern. The data is a mix of neutral and positive signals. As such, we remain near term “neutral” in our outlook for the major equity indexes due to the current charts and data, but said rating is tenuous given breadth weakening and general tone.
- On the charts, the only index to close higher yesterday was the DJI (page 2) after recovering from a break of support on an intraday basis. The rest saw losses registered in spite of their rallies well above their intraday lows. Yet in spite of the afternoon strength, breadth remained negative as well as up/down volumes. The VALUA (page 5) closed below support while the RTY (page 5) closed on support but back below its 50 DMA. The MID (page 4) closed on support as well. In our opinion, yesterday’s intraday rally appeared weak regarding participation, suggesting that while supports held, they may have become more vulnerable. The cumulative advance/decline lines for the All Exchange and NYSE remain neutral with that of the NASDAQ negative.
- The data finds all of the McClellan OB/OS Oscillators neutral (All Exchange:-25.34/+2.1 NYSE:-26.87/+6.83 NASDAQ:-27.43/-3.26) as is the OpenInsider Buy/Sell Ratio at 42.7. All of the put/call ratios are bullish, however, for the Total (1.02) Equity (0.76) and OEX (0.34). We have been seeing generally positive signals from the options data lately but it has been insufficient in terms of actual positive response from the markets. Valuation finds the forward 12 month P/E for the SPX based on forward 12 month consensus earnings estimates from Bloomberg of $162.40 at a 16.2 multiple versus the “rule of 20” implied fair value of 17.0.
- In conclusion, we are maintaining our near term “neutral” outlook for the major equity indexes as the charts and data have not actually registered enough of a shift to alter that view. However, the aspects discussed above have us looking over our shoulder in that regard.
- SPX: 2,613/2,683
- DJI: 23,825/24,690
- NASDAQ: 6,959/7,177
- NDX: 6,459/6,700
- DJT: 10,183/10,565
- MID: 1,873/1,912
- Russell: 1,545/1,595
- VALUA: 5,944//6,070