Some Sentiment Indicators See Improvement
Opinion: All of the indexes closed higher yesterday with positive internals as volumes declined slightly on the NYSE and rose on the NASDAQ. All closed at or near their intraday highs. However, resistance levels were neither tested nor violated. The trading turned the 1 day McClellan OB/OS Oscillators neutral, decreasing some short term thrust potential. However, we have seen some improvement in some of the sentiment indicators discussed below. So although IBES has reduced their forward 12 month earnings estimates for the SPX, we remain of the opinion, in spite of the negative futures, that the near term outlook for the markets is neutral/positive while remaining cautious for the more intermediate term.
- On the charts, the indexes had a good day yesterday as all closed higher and near their intraday highs with good internals. However, no technical events were achieved regarding current resistance levels being tested or violated. As such, the prior short term downtrends that were recently violated have now shifted to sideways patterns for the near term. All of the stochastic levels are now in neutral territory as well.
- The data has seen some shifting but, in our opinion, continues to have a somewhat bullish bias. Yesterday’s rally dropped all of the 1 day McClellan OB/OS Oscillators into neutral territory (All Exchange:+10.41 NYSE:+9.36 NASDAQ:+10.15) from their prior oversold levels. As such some of the short term fuel available for further gains has been lessened. However, all of the 21 day levels remain oversold (All Exchange:-98.52 NYSE:-96.12 NAADAQ:-105.8) and offering some support.
- While the OEX Put/Call Ratio (smart money) has turned negative as the pros have flipped their prior long call positions to a bearish 1.76, other sentiment is improving. The Rydex Ratio (contrary indicator) continues to show the leveraged ETF traders shedding long positions down to 31.7, a level seen near last October’s correction lows, while the Gambill Insider Buy/Sell Ratio finds insiders ramping up their buying to a bullish 41.4. This dynamic has usually resolved itself with an upward bias for the markets.
- In conclusion, although less so than a few days ago, we see the near term as neutral/positive but remain intermediate term cautious for the equity markets.
- Forward 12 month earnings estimates for the SPX from IBES have been lower to $124.43 from $125.33, leaving a 6.54% earnings yield and a 15.3 forward multiple.
SPX: 1,822/1921
DJI: 15,383/16,340
COMPQX; 4,418/4,644
DJT: 6,580/7,022
MID: 1,230/1,315
RUT: 982/1,052
VALUA: 3,803/4,070