Charts Remain Short Term Neutral
Opinion: The indexes closed mixed yesterday with positive internals on the NYSE and negative internals on the NASDAQ. Volumes remained subdued as they have been over the past few sessions. No technical events were triggered on the charts while the data remains largely neutral and continues to imply some further sideways consolidation for the indexes over the near term. Overall breadth remains positive and encouraging for the intermediate term although valuation is becoming more elevated. The U.S. Dollar failed to surpass its technical resistance and remains in is short term downtrend.
- On the charts, it was another lackluster day of trading as most of the indexes posted fractional gains while the COMPQX (page 3) and DJT (page 3) closed lower on the day. Internals were positive on the NYSE and negative on the NASDAQ as volumes remained subdued. The light volume and minimal price action of the past several sessions are what is frequently seen in charts after a significant rally as the markets pause pending their next move. At this point, we are inclined to see the pause as one prior to the resumption of the uptrends as no trend violations have been noted during this period of consolidation. We would also note the U.S. Dollar as measured by the UUP ETF (page 9) failed to penetrate resistance after violating support on 3/16. Its short term and intermediate term downtrends remain intact.
- The data remains almost entirely neutral as well including all of the 1 day McClellan OB/OS Oscillators (All Exchange:-9.15 NYSE:-2.82 NASDAQ:-14.33). The sideways action of the past several sessions has been helpful in moderating their prior overbought conditions. The Total and Equity Put/Call Ratios are neutral as well at 0.78 and 0.66. The only outlying negative signal is coming from the OEX Put/Call Ratio (smart money) that still shows the pros very heavily weighted in pouts at 2.67 as they bet on near term expectations of weakness.
- In conclusion, we are of the opinion that both the charts and data remain suggestive of some further short term sideways consolidation while positive breadth is suggesting a positive intermediate term outlook that is being tempered by valuations approaching historically rich levels.
- Forward 12 month earnings estimates for the SPX from IBES of $123.12 leave a 6.04% forward earnings yield on a 16.5 forward multiple.
SPX: 2,005/2,076
DJI: 17,009/17,712
COMPQX; 4,715/4,924
DJT: 7,536/8,150
MID: 1,389/1,428
RUT: 1,065/1,107
VALUA: 4,320/4,586