Data Unavailable
Opinion: The indexes closed mixed yesterday with negative internals on the NYSE and positive internals on the NASDAQ. Volumes increased on both exchanges. The charts saw a mix of bullish and bearish events while the VIX remains near its 2 year lows. With the data unavailable for the most part this morning, we remain of the opinion that the near term outlook for the general markets is “neutral/negative” due to the recent rally becoming stretched with a higher probability of some consolidation/correction occurring for reasons discussed below. Valuation for the SPX at a decade high keeps us “neutral” for the more intermediate term.
On the charts, the indexes closed mixed with the DJI (page 2), COMPQX (page 3) and RUT (page 4) closing higher on the day. The DJI’s advance was, however, fractional. The rest closed in the red. The one positive event registered came from the COMPQX closing above its near term resistance level, adjusted below, on good volume. The negative event came from the DJI joining the DJT in flashing a “bearish stochastic crossover” signal, implying, at a minimum, a slowing of trend. We continue to keep a close eye on the VIX (page 9) as it remains very near its 2 year low support that has been followed by an increase in market volatility and varying degrees of market weakness.
The data is largely unavailable this morning with the exception of the WST Ratio and its Composite that remain bearish at 65.8 and 166.7 respectively. Given the generally muted action in the markets yesterday, we suspect the data is little changed from yesterday’s readings that had a somewhat cautionary tone.
In conclusion, we remain near term “neutral/negative” for the major indexes as we believe the recent rally appears to be technically extended and vulnerable to some near term downside retracement. Weakening stochastic levels, the position of the VIX and extended valuation contribute to our concerns.
Forward 12 month earnings estimates for the SPX from IBES of $126.29 leave a 5.82% forward earnings yield on a 17.2 forward multiple.
SPX: 2,119/2,175
DJI: 18,026/18,582
COMPQX; 4,971/5,175
DJT: 7,696/8,017
MID: 1,518/1,555
RUT: 1,177/1,219
VALUA: 4,753/4,903