Insiders Remain Active Sellers
Opinion: The indexes closed mixed yesterday with positive internals on the NYSE and NASDAQ as volumes rose notably from the prior session. The technical pictures of the charts sent mixed messages, in our opinion, while the data remains mixed as well. As such, we are maintaining our near term “neutral” outlook for the major equity indexes while extended forward valuation for the SPX near historic highs remains a concern, keeping our intermediate term view “neutral” as well.
On the charts, the indexes put in mixed performances yesterday with surprisingly positive internals. The SPX (page 2), DJI (page 2) and DJT (page 3) closed lower on the day with the DJI closing below its yearlong uptrend line. The DJT closed below its short term uptrend line initiated at the beginning of November. The DJI and DJT, as well as the COMPQX (page 3), flashed “bearish stochastic signals”. However, no support levels were violated, leaving the DJI and DJT in their current sideways patterns. The rest of the indexes closed higher with the RTY (page 4) managing to close back above its 50 DMA that had been violated in the prior session. The net result was all but the SPX and COMPQX, which remain in uptrends, are back in their sideways, neutral, patterns.
The data remains mixed as well. Most of the McClellan OB/OS Oscillators remain neutral with the exception of the NYSE 21 day that is mildly overbought (All Exchange:-25.13/+28.06 NYSE:-11.39/+51.09 NASDAQ:-22.32/+7.0). The OEX Put/Call Ratio (smart money) is a neutral 1.21 while the Equity Put/Call Ratio (contrary indicator) is mildly bullish at 0.7. What continues to be of some concern is the Gambill Insider Buy/Sell Ratio showing insiders continue to increase their already active selling activity to a bearish 7.4. We have frequently found that when insiders are very active sellers into an otherwise broadly embraced rally, paying heed to the insiders has been a wise decision.
In conclusion, the generally sideways action of the bulk of the indexes that has been going on since the middle of December remains intact. And while insider activity is disconcerting, the charts have yet to flash actual technical sell signals to turn our opinion to a more cautionary tone.
Forward 12 month earnings estimates for the SPX from IBES of $132.36 leave a 5.8 forward earnings yield on a 17.2 forward multiple, near a 12 year high.
SPX: 2,237/2,298
DJI: 19,832/19,992
COMPQX; 5,531/5,663
DJT: 9,000/9,325
MID: 1,659/1,697
RTY: 1,356/1,357
VALUA: 5,290/5,387