Data Suggests Pause Or Bounce
Opinion: All of the indexes closed lower yesterday with negative internals on the NYSE and NASDAQ. Volumes declined on both exchanges from the prior session. Some of the charts saw further deterioration. However, the data is at levels now suggesting a pause or possible bounce from the recent weakness. Yet unless we see an improvement in breadth and or trend, we remain of the opinion that the various near term trends of the indexes be respected, whether positive, neutral or negative.
- On the charts, all of the indexes closed lower yesterday with negative internals on lighter volume. Some chart deterioration was seen on the DJI (page 2) and VALUA (page 5) as both closed below their near term support levels while the VALUA also broke its 50 DMA. We now fid the index trends as follows, Positive: COMPQX (page 3) & NDX (page 3), Neutral: SPX (page 2), DJI and MID (page 4), Negative: DJT (page 4), RTY (page 5) and VALUA. As well, the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are all negative and below their 50 DMAs. The charts are in need of improvement in order to become more positive in our outlook.
- The data, on the other hand, is now offering some encouragement after the past several weak market sessions. All of the 1 day McClellan OB/OS Oscillators are oversold as the 21 day levels remain neutral (All Exchange:-70.0/-36.43 NYSE:-83.04/-30.86 NASDAQ:-59.64/-38.49). All of the put/call ratios are bullish as well with the Total and Equity Put/Call Ratios (contrary indicators) finding the crowd long puts at 1.04 and 0.74 respectively as the pros are on the opposite side of the fence and long calls with a 0.6 OEX Put/Call Ratio. The Open Insider Buy/Sell Ratio remains neutral at 47.7.
- In conclusion, while the data is implying some degree of relief from the recent slide, in our opinion, we need to see some improvement in breadth and trend to move from our current opinion that the individual index trends should be respected for their differing messages.
- 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: 22,879/23,567
COMPQX; 6,557/6,753
NDX: 5,994/NA
DJT: 9,380/9,750
MID: 1,810/1,843
RTY: 1,450/1,489
VALUA: 5,650/5,811