NYSE: Charts See More Weakening Signals

Published 03/09/2017, 09:02 AM
Updated 07/09/2023, 06:31 AM
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SPX Forward Earnings Estimates Rise

Opinion: Most of the indexes closed lower yesterday with the exception of the COMPQX. Internals were negative on the NYSE and mixed on the NASDAQ as volumes rose slightly from the prior session. Some further technical weakness was registered on some of the charts while the data is seeing some polar opposite extremes sending a mixed message. IBES forward 12 month earnings estimates have been lifted but valuation remains near peak levels seen over the past decade. The net result is we don’t see quite enough of a shift in the weight of the evidence to alter our current “neutral/negative” near term outlook for the major equity indexes at this time.

· On the charts, the only index closing higher yesterday was the COMPQX (page 3) which did so on negative breadth. The rest declined with the SPX (page 2) closing below near term support, the DJT (page 3) closing below its 50 DMA and the VALUA (page 5) closing below near term support as well as its intermediate term uptrend line and 50 DMA. All of the short term trends are now neutral, in our opinion, while the advance/decline lines for the NYSE, NASDAQ and All Exchange are negative.

· The data is at polar opposites in some cases. All of the 1 day McClellan OB/OS Oscillators remain oversold (All Exchange:-84.07/-2.16 NYSE:-115.49/+1.05 NASDAQ:-77.64/-8.26) with the NYSE 1 day at an extreme that historically has suggested some near term relief of selling pressure. However, the OEX Put/Call Ratio is equally extreme, but in the opposite direction, as the pros are very heavily weighted in puts at 2.81 as they are betting very heavily on near term weakness continuing. The new Investors Intelligence Bear/Bull Ratio (contrary indicator) has moderated to 17.3/57.7 but still shows an excess of bullish sentiment on the part of investment advisors. Finally, IBES has raised their consensus forward 12 month earnings estimates for the SPX from $132.19 to $133.18. Yet that still leaves the SPX forward p/e near a decade high at a 17.7 multiple.

· In conclusion, while the OB/OS levels are suggesting some pause/bounce potential for the near term and forward earnings estimates have lifted, the chart action, valuation and sentiment levels are counterbalancing enough to leave our near term “neutral/negative” outlook for the major equity indexes in place.

· Forward 12 month earnings estimates for the SPX from IBES of $133.18 leave a 5.64 forward earnings yield on a 17.7 forward multiple, over a decade high.

SPX: 2,360/2,384
DJI: 20,761/20,957
COMPQX; 5,804/5,871
DJT: 9,261/9,494
MID: 1,697/1,744
RTY: 1,355/1,392
VALUA: 5,354/5,452

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