Near Term Outlook Continues “Neutral”
Opinion: All of the indexes closed lower Friday with positive internals on the NYSE while NASDAQ internals were negative. Volumes swelled from the prior session due to options expiration. No significant technical events occurred on the charts while the data remains a mixed bag of directional implications. As such we continue to have a near term “neutral” outlook for the major equity indexes and “neutral” for the intermediate term as a result of historically high forward valuation of the SPX.
· On the charts, all of the indexes closed lower Friday on heavy volume, from options expiration, with all closing at or near their intraday lows. While the near term uptrend lines for the SPX (page 2), DJI (page 2) and COMPQX (page 3) remain intact, the SPX did see a “bearish stochastic crossover” signal generated. The rest of the indexes saw the same signal generated last week with all violating their near term uptrend lines shortly thereafter. The bulk of the indexes remain extended well above their 50 DMAs which continue to be a concern. Yet the chart trends remain a mix of neutral trends for the small and mid-caps while the large cap indexes remain in their uptrends.
· The data is mixed with only the NYSE 21 day McClellan OB/OS Oscillator mildly overbought (All Exchange:-1.62/+41.06 NYSE:+6.44/+50.32 NASDAQ:-4.4/+39.4). The rest are neutral. The OEX Put/Call Ratio (smart money) finds the pros very heavy in calls at 0.44 as they expect near term market strength while the Equity Put/Call Ratio finds the crowd neutral at 0.62. Negative signals are coming from the WST Ratio/Composite at 74.9/157.3 while the Gambill Insider Buy/Sell Ratio remains bearish at 7.3 as insiders continue to use recent market strength as a selling opportunity.
· In conclusion, both the data and charts are sending mixed signals leaving our near term market projections at “neutral”. However, the chart extensions above their 50 DMAs along with active insider selling are worthy of note.
· Forward 12 month earnings estimates for the SPX from IBES of $130.86 leave a 5.78 forward earnings yield on a 17.3 forward multiple, a 12 year high.
SPX: 2,199/NA
DJI: 19,115/NA
COMPQX; 5,306/5,480
DJT: 9,041/9,381
MID: 1,618/1,690
RTY: 1,334/NA
VALUA: 5,170/5,374