1 Day McClellan OB/OS Remain Neutral
Opinion: The indexes closed mixed yesterday with mixed internals as all closed at or near their intraday lows. No technical events were generated. The data remains a mixed bag but the McClellan 1 day OB/OS Oscillators remain neutral and offer no oversold bounce potential. The futures indicate a very weak open that suggest the SPX and COMPQX will test the intraday lows of their “hammer bottoms” formed on 1/20 and 2/8 respectively. Those levels need to hold on a closing basis to avert a technical break that would imply further weakness over the near term.
- On the charts, the indexes closed mixed with mixed internals resulting in no technical signals being generated. However, all closed at or near their intraday lows as all attempts at recovery were abandoned in the last hour of trading. Given the state of the very weak futures this morning, it appears that the “hammer bottoms” for the SPX and COMQX on 1/20 and 2/8 respectively will be tested on the open. The SPX needs to hold the 1,813 level on a closing basis with the COMPQX critical level being 4,211. Technical analysis theory states that the intraday lows of hammer formations are important potential support levels as they imply a peak in selling pressure that was eventually overcome. Should those levels be breached on a closing basis, the action would imply further downside in the offering. If held, they would validate the concept that selling pressure has truly peaked and a bullish reversal would then be the higher probability. Unfortunately, we cannot predict the close and will have to wait to see which signal is generated.
- The data is a mixed bag with all of the 1 day McClellan OB/OS Oscillators neutral (VALUA:-28.02 NYSE:-27.14 NASDAQ:-32.83). They are not at levels offering hope of an oversold bounce. However, the WST Ratio and its Composite are bullish at 27.8 and 93.3 while the new Investors Intelligence Bear/Bull Ratio (contrary indicator) shows advisors increasing their fear levels to 39.2/24.7. While the psychology indicators show a very healthy wall of worry being built, they are not great at short term directional implications. They can stay encouraging for more extended periods as prices continue to decline before reversing. Yet a good deal of air has already been released from the proverbial tire since the beginning of last December.
- Forward 12 month earnings estimates for the SPX from IBES is $123.91 leaving a 6.69% forward earnings yield with a 14.9 forward multiple.
SPX: 1,813/1,907
DJI: 15,975/16,592
COMPQX; 4,211/4,537
DJT: 6,790/7,022
MID: 1,216/1,290
RUT: 956/1,019
VALUA: 3,827/4,070