Short Term Sideways Patterns Remain Intact
Opinion: Most of the indexes closed higher Friday, with the exception of the COMPQX. While internals were positive, volumes were tepid as gains were modest. No important technical events occurred on the charts while the data remains largely neutral with a slightly positive tilt. As such, we remain of the opinion that the near term outlook for the indexes is “neutral” while the intermediate term view is also “neutral”, due largely to extended valuation although general market breadth remains healthy.
- On the charts, the only index to close lower on the day Friday was the COMPQX (page 3). The rest closed with modest gains while the bulk closed nearer the intraday lows. The DJT (page 3) and VALUA (page 5) were exceptions in that regard as they closed near the midpoint of their intraday ranges. Volumes were modest, leaving the charts in their neutral, sideways patterns.
- The data remains largely neutral as well including all of the McClellan OB/OS Oscillators (All Exchange:-21.33/+28.22 NYSE:-26.08/+45.49 NASDAQ:-19.23/+9.28). The WST Ratio and its Composite are also neutral at 49.3 and 133.1. There is a slightly positive tone coming from the Put/Call Ratios in that the Equity Put/Call Ratio (contrary indicator) has turned a bullish 0.75 while the OEX Put/Call Ratio (smart money) now finds the pros weighted in calls at 0.57 and expecting some degree of near term strength. So the data has a slightly positive edge, but not sufficient, in our opinion, to cause a shift in our generally neutral short term opinion.
- In conclusion, our near term outlook remains neutral due to the current state of the data and charts while the intermediate term is also “neutral” as valuation issues are beginning to temper that outlook.
- Forward 12 month earnings estimates for the SPX from IBES of $122.64 leave a 5.99% forward earnings yield on a 16.7 forward multiple.
SPX: 2,025/2,076
DJI: 17,438/17,859
COMPQX; 4,775/4,924
DJT: 7,604/7,937
MID: 1,405/1,451
RUT: 1,065/1,120
VALUA: 4,385/4,552