Index Chart Trends Remain Mixed
Opinion: All of the indexes closed lower yesterday with negative internals on the NYSE and NASDAQ as volumes rose from the prior session on both exchanges. No support levels were violated but 2 more cautionary signals appeared on the charts as breadth weakened further. The data is a mix of neutral and positive signals but the trends remain the focus which range from negative to positive. Given the weakening in breadth and extended valuation, we suggest respecting the individual trends for the various indexes for their current status while keeping breadth in mind as a potential headwind.
- On the charts, all of the indexes closed lower yesterday with negative breadth and up/down volume on the NYSE and NASDAQ as overall volume increased from the prior session. While no support levels were violated, the RTY (page 5) joined the DJT (page 4) in closing below its 50 DMA as the COMPQX (page 3) gave a “bearish stochastic crossover” signal. The current near term trends find the SPX (page 2), COMPQX and NDX (page 3) in uptrends, the DJI (page 2), MID (page 4) and VALUA (page 5) neutral and the DJT and RTY negative. Adding to the recent shifts in trend over the past several sessions, we now find the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ negative with the NYSE A/D the only one above its 50 DMA. The net picture is one of gradual deterioration with the large cap indexes holding on.
- The data is mostly neutral with a few encouragements. The All Exchange and NYSE 1 day McClellan OB/OS Oscillators are oversold with the rest neutral (All Exchange:-57.7/-34.32 NYSE:-67.99/-26.17 NASDAQ:-49.05/-39.6). The Total Put/Call Ratio (contrary indicator) is a mildly bullish 0.9 as the OEX Put/Call Ratio is a bullish 0.76. The bulk of the rest of the data is in neutral territory.
- In conclusion, the charts are showing a deterioration of market internals as trends and breadth have shown some weakening over the past several sessions. As such, while some issues may advance, we see the message as one of increased difficulty in participation. As such, we recommend respecting the current trends of the indexes, as discussed above, on their individual merit.
- Forward 12 month earnings estimates for the SPX from Bloomberg of $136.79 leave a 5.35 forward earnings yield on a 18.9 forward multiple, a 15 year high.
SPX: 2,547/NA
DJI: 23,314/NA
COMPQX; 6,557/NA
NDX: 5,994/NA
DJT: 9,380/9,750
MID: 1,810/1,843
RTY: 1,450/1,489
VALUA: 5,761/5,858