NASDAQ Remains On “Bearish Divergence” Signal
Opinion: The indexes closed mostly lower yesterday with the exceptions of the DJI and COMPQX. Internals were negative on the NYSE and NASDAQ as NYSE volumes slipped while the NASDAQ volumes were flat from the prior session. Little was changed on the charts of any real significance while the NASDAQ remains on a “bearish divergence” signal. As such, we are keeping our near term “neutral” outlook for the major equity indexes in place.
- On the charts, the DJI (page 2) and COMPQX (page 3) closed higher yesterday as the rest declined. Internals were negative on both exchanges. The COMPQX did make another new closing high but the NASDAQ A/D (page 9) remains on a “bearish divergence” signal as the index is making higher highs while internal breadth is making a series of lower highs and lower lows. This is not a healthy internal structure but is not as damning as if it was occurring on the NYSE. Nonetheless, it does describe money chasing fewer and fewer stocks on the NASDAQ. The DJT (page 3) closed back below its 50 DMA leaving all but the SPX and COMPQX in neutral sideways patterns. No support or resistance levels were violated on the charts.
- The data is almost completely neutral including all of the McClellan OB/OS Oscillators (All Exchange:-3.76/+33.6 NYSE:-11.25/+35.85 NASDAQ:-6.39/+16.43). All of the put/call ratios that were bullish yesterday have returned to neutral as well (Total:0.85 Equity:0.6 OEX:1.23).
- In conclusion, we are keeping our near term “neutral” outlook for the major equity indexes intact as there has not been enough of a shift in the charts or data to warrant such a move.
- Forward 12 month earnings estimates for the SPX from IBES of $134.58 leave a 5.63 forward earnings yield on a 17.8 forward multiple, near a decade high.
SPX: 2,381/NA
DJI: 20,659/21,008
COMPQX; 6,053/NA
DJT: 8,984/9,231
MID: 1,720/1,749
RTY: 1,389/1,410
VALUA: 5,447/5,554