Data Turning More Positive
Opinion: All of the indexes closed lower yesterday with negative internals as volumes rose on both the NYSE and NASDAQ. Three of the large cap indexes violated their near term support levels while overall breadth remains negative. However, the data has increased its positive tone and is at levels implying the potential for some possible stabilization. So although the charts that usually are the determining factor in our analysis remain problematic, the current state of the data suggests we should stick with our current “neutral” short term outlook for the indexes. The intermediate term outlook continues to be “neutral” due to extended forward 12 month valuation for the SPX.
- On the charts, all of the indexes closed lower with negative breadth and heavier volume as the series of lower highs for the indexes persists. Most closed near the midpoints of their intraday ranges as late buying lifted them off of their lows. Negative signals came from the SPX (page 2), DJI (page 2) and COMPQX (page 3) all closing below their respective near term support levels that have been adjusted below. The DJT (page 3), MID (page 4), RTY (page 4) and VALUA (page 5) all tested support and held. The net result is that the series of lower highs that we have been discussing in recent comments goes unabated while internal market breadth remains negative as well. In our opinion, the charts need to violate their trend of lower highs to become more encouraging.
- However, the data is now generally at levels frequently seen near short term market lows and tempering the negative message from the charts, in our opinion. Should any positive news cross the tape with the data in its current conditions, upside action could be more dramatic than might be expected. All of the McClellan OB/OS Oscillators have increased their oversold conditions (All Exchange:-83.19/-69.86 NYSE:-86.21/-64.0 NASDAQ:-83.33/-75.0). The WST Ratio/Composite is at extremely low levels and bullish at 6.7/67.1 while staying on a “bull alert” signal. The crowd is now quite fearful and very heavy in puts via the Total and Equity Put/Call Ratios (contrary indicators) at 1.43 and 0.86. Also, while still in neutral territory, the Gambill Insider Buy/Sell Ratio finds insiders increasing their buying activity to 22.5.
- Only the OEX Put/Call Ratio (smart money) remains very bearish with the pros continuing their heavy put exposure at 3.77 as they bet on more weakness.
- In conclusion, the debate between the charts and data is too evenly matched, thus causing us to stay with our near term “neutral” outlook for the major indexes.
- Forward 12 month earnings estimates for the SPX from IBES of $128.94 leave a 6.11 forward earnings yield on a 16.4 forward multiple.
SPX: 2,100/2,144
DJI: 17,956/18,287
COMPQX; 5,109/5,240
DJT: 7,954/8,144
MID: 1,490/1,534
RTY: 1,190/1,235
VALUA: 4,748/4,897