Data Remains Mixed
Opinion: All of the indexes closed lower yesterday with negative internals as trading volumes declined on both exchanges versus the prior session. No technical events of import were registered on the charts, leaving them in their mix of modest uptrends and sideways patterns. The data remains a mixed bag as well with some conflicting levels. So, although we continue to have some concerns regarding valuation and market psychology, there is not enough current evidence available to alter our near term “neutral” outlook. The 17.4 multiple of forward earnings estimates for the SPX keeps the intermediate view also “neutral”.
· On the charts, all of the indexes closed lower with negative internals as volumes slipped from the prior session. No support or resistance levels were violated although the DJI (page 2), COMPQX (page 3) and DJT (page 3) tested resistance on an intraday basis but failed. As such, the very modest uptrends for the SPX (page 2), DJI, COMPQX and MID (page 4) remain intact as do the sideways “rectangle” patterns for the DJT, RTY (page 4) and VALUA (page 5).
· The data remains a mixed bag. All of the McClellan OB/OS Oscillators are neutral (All Exchange:+11.1/+17.82 NYSE:+2.3/+33.33 NASDAQ:-8.39/-1.41). The Total and Equity Put/Call Ratios (contrary indicators) find the crowd growing nervous and long puts at 1.05 and 0.75 respectively. However, the pros measured by the OEX Put/Call Ratio (smart money) have jumped the fence and are now very long puts at 2.32 in anticipation of near term weakness. Of greater concern for us is the Gambill Insider Buy/Sell Ratio still finds insiders to be very active sellers of their stock at 7.5 while investment advisors via the Investors Intelligence Bear Bull Ratio (contrary indicator) still finds advisors almost entirely bullish and devoid of concern at 17.6/61.8. Bullish advisors with bearish insiders have frequently proven to be a problem for the market’s future prospects.
· In conclusion, our near term neutral outlook that has been in place for the past several weeks remains intact until we see some stronger evidence to suggest otherwise, whether it be from the charts or data.
· Forward 12 month earnings estimates for the SPX from IBES of $132.10 leave a 5.75 forward earnings yield on a 17.4 forward multiple, near a 12 year high.
SPX: 2,253/2,298
DJI: 19,832/20,097
COMPQX; 5,531/5,663
DJT: 9,000/9,325
MID: 1,659/1,710
RTY: 1,356/1,357
VALUA: 5,290/5,393