Chart Trends Unchanged
Opinion: The indexes closed mixed yesterday with positive internals on the NYSE while NASDAQ internals were mixed. Volumes rose on the NYSE and declined on the NASDDAQ. Again, no technical events of import were generated on the charts, in our opinion. However, we have seen enough of a shift in the data to suggest moving our prior near term outlook for the major indexes from “neutral/negative” to “neutral”. Forward 12 month valuation of the SPX remaining near historic highs keeps our intermediate term view at “neutral”.
· The SPX (page 2), DJI (page 2) and COMPQ (page 3) posted minor losses yesterday while the balance of the indexes closed in the green. Internals were positive with higher volumes on the NYSE while NASDAQ internals were mixed on lower volume. No trend lines, support or resistance levels were violated during the session. The series of lower highs on all but the DJT (page 3) and COMPQX remain intact as do the negative advance/decline lines. However, there is some minor encouragement coming from the stochastic readings that find the COMPQX, MID (page 4) and VALUA (page 5) all in oversold condition. Bullish crossover signals, however, have yet to be generated.
· The data is having the greater influence in our shift to “neutral” for the near term market prospects. The WST Ratio/Composite is bullish at 17.9/77.5 and on a “bull alert” signal while all of the McClellan OB/OS Oscillators are oversold (All Exchange:-59.91/-61.58 NYSE:--56.33/-53.43 NASDAQ:-65.1/-68.27). Both the Total and Equity Put Call Ratios (contrary indicators) find the crowd nervous and long puts at 1.06 and 0.75 respectively. The Gambill Insider Buy/Sell Ratio has improved to 19 but remains neutral. One negative signal is coming from the OEX Put/Call Ratio (smart money) at 4.53 as the pros remain extremely weighted in puts as they press their bets on expectations of near term market weakness.
· In conclusion, while the charts have yet to break away from their current patterns of mostly lower highs, the data, in our opinion, has moved the scales enough for us to alter our near term outlook from “neutral/negative” to “neutral”. The 16.5 forward 12 month multiple on the SPX keeps our intermediate term outlook at “neutral”.
· Forward 12 month earnings estimates for the SPX from IBES of $128.91 leave a 6.06 forward earnings yield on a 16.5 forward multiple.
SPX: 2,120/2,171
DJI: 18,078/18,335
COMPQX; 5,167/5,282
DJT: 7,954/8,144
MID: 1,490/1,534
RTY: 1,190/1,235
VALUA: 4,748/4,897