Short Term Outlook Remains “Neutral/Positive”
Opinion: The indexes closed mixed yesterday with mixed internals on the NYSE while NASDAQ internals were positive. Volumes declined from the prior session on both exchanges. Once again, no technical events of import were generated as the indexes remain generally stuck in their sideways patterns. The data remains almost entirely neutral as well, thus leaving our near term outlook “neutral/negative”. With the positive futures this morning, there may be enough lift to get us out of the quagmire. That will depend on closing prices today. Historically high valuation keeps our intermediate view at “neutral”.
· On the charts, the indexes closed mixed yesterday with positive A/D on the NYSE but negative up/down volumes. NASDAQ internals were positive as volumes dropped on both exchanges. The COMPQX (page 3), MID (page 4) and RUT (page 4) closed higher while the rest posted small losses. Once again, no technical events occurred implying a shift out of their current sideways patterns. We would mention the advance/decline lines remain positive for the All Exchange, NYSE and NASDAQ.
· One chart we feel worth noting this morning is the sliver ETF chart, SLV on page 9. What appeared to be possible topping action over the past seven weeks was followed by what we consider to be a technical sell signal yesterday as the chart broke below its near term support as well as its 50 DMA. Given the magnitude of appreciation since the beginning of the year, some correction in price would not be unusual. Its longer term trend, however, remains intact.
· The data remains almost completely neutral including all of the McClellan OB/OS Oscillators (All Exchange:-19.76/+23.92 NYSE:-30.77/+27.16 NASDAQ:-8.02/+21.02). The Equity Put/Call Ratio and Gambill Insider Buy/Sell Ratio remain neutral at 0.63 and 14.1 respectively while the OEX Put/Call Ratio (smart money) continues o send a bullish message as the pros remain very weighted in calls at 0.42 expecting some strength. Thus the data is also sending a largely neutral projection, similar to the charts.
· In conclusion, the charts and data continue to imply a “neutral/positive” outlook for the indexes over the near term. Today’s futures may be encouraging but the close will tell the tale. We remain “neutral” for the intermediate term due to extended valuation.
· Forward 12 month earnings estimates for the SPX from IBES of $127.23 leave a 5.83% forward earnings yield on a 17.2 forward multiple.
SPX: 2,160/NA
DJI: 18,374/NA
COMPQX: 5,160/NA
DJT: 7,795/7,974
MID: 1,534/NA
RUTNU: 1,199/1,244
VALUA: 4,811/4,939