All McClellan OB/OS Oscillators Remain Overbought
Opinion: Most of the indexes closed higher yesterday with the exception of the COMPQX closing fractionally lower. Internals were positive on both exchanges while volumes declined from the prior session on the NYSE and rose on the NASDAQ. More resistance levels were violated on the charts with a few other positive technical events. The data remains a combination of mixed signals leaving our near and intermediate term outlooks unchanged at “neutral/positive”. However, the forward p/e for the SPX continues to rise and is now near peak levels that offer some concern.
- The only index unable to close higher yesterday was the COMPQX (page 3) that closed fractionally lower. Internals were positive on both exchanges but less robust than what we have seen of late. There were several positive chart events registered as the DJI (page 2), DJT (page 3) and MID (page 4) all closed above their respective resistance levels. As well, the DJT finally joined the rest of the indexes in closing above its 50 DMA. We would also note the VALUA (page 5) closed above its long term return line that has been a barrier to progress over the past several months. All of the advance/decline lines are positive while all of the short term uptrend lines also remain intact. As such, the charts remain positive.
- The data continues to be a mixed bag with all of the McClellan OB/OS Oscillators overbought (All Exchange:+60.7/63.22 NYSE:+65.2/+78.85 NASDAQ:+58.78/+50.61). The WST Ratio and its Composite are still neutral at 61.8 and 143.3 along with the Gambill Insider Buy/Sell Ratio of 13.3. The OEX Put/Call Ratio (smart money) again finds the pros very long puts, but less so than the prior reading, at 2.31 in their expectation of some near term weakness. So the data is giving little in the way of projecting near term probabilities for the indexes.
- In conclusion, while the recent rally may be a bit extended, we have yet to see any sell signals on the charts or a predominance of bearish data to alter our near and intermediate term “neutral/positive” outlooks for the indexes. However, the forward p/e for the SPX based on forward 12 month earnings estimates form IBES at 17.0 suggests valuation is stretched.
- Forward 12 month earnings estimates for the SPX from IBES of $124.48 leave a 5.89% forward earnings yield on a 17.0 forward multiple.
SPX: 2,072/2,116
DJI: 17,650/18,058
COMPQX; 4,861/5,003
DJT: 7,638/7,950
MID: 1,482/1,530
RUT: 1,133/1,201
VALUA: 4,636/4,792