Data Slightly Positive
Opinion: All of the indexes closed lower again yesterday with negative internals as most closed at or near their intraday lows. Volumes remained dull as in the prior down session. While a couple of the charts saw some weakening events, all of the current support levels held. The data remains largely neutral but does have some encouraging signals coming from the market psychology sector. As such, our near term outlook remains “neutral/positive” while extended forward valuation of the SPX keeps our intermediate term view at “neutral”.
· On the charts, all of the indexes closed lower with negative breadth as volumes declined form the prior weak session. No support levels were violated but the SPX (page 2) closed below its short term uptrend line while the DJI (page 2) closed below its intermediate term uptrend line. The VALUA (page 5) closed below its 50 DMA. While not positive events, we do not regard these signals as dire. In our opinion, it would require breaks of their respective support levels in order to become more cautious in our chart view.
· The data is mostly neutral including all of the McClellan OB/OS Oscillators (All Exchange:-22.7/+14.76 NYSE:-19.61/+19.24 NASDAQ:-26.57/+12.81). The WST Ratio/Composite remains neutral at 54.6/139.5 along with the 16.3 Gambill Insider Buy/Sell Ratio. Some minor encouragement is coming from the put/call ratios as the Total and Equity Put/Call Ratios (contrary indicators) find the crowd nervous and long puts at 1.15 and 0.73 respectively. The pros as measured by the OEX Put/Call Ratio are on the other side of the trade and mildly long calls at 0.83. Also, last week’s AAII Bear/Bull Ratio (contrary indicator) finds the crowd with bears outnumbering bulls at b38.28/24.83. As such, the data scales are neutral with a slightly positive tilt.
· In conclusion, the last two down sessions in the markets have, thus far, been unable to violate near term support levels on the charts. The trends that vary between neutral and positive, depending on the index, remain intact at this point. With the data neutral and ever so slightly positive, we are inclined to keep our near term outlook for the indexes at “neutral/positive”. Historically high forward valuation for the SPX keeps our intermediate term view at “neutral”.
· Forward 12 month earnings estimates for the SPX from IBES of $127.97 leave a 5.91% forward earnings yield on a 16.9 forward multiple.
SPX: 2,138/2,187
DJI: 18,078/18,515
COMPQX; 5,221/NA
DJT: 7,744/7,957
MID: 1,526/1,573
RUT: 1,227/NA
VALUA: 4,848/5,002