Data Remains Mixed
Opinion: The indexes closed mixed yesterday with internals negative on the NYSE and mixed on the NASDAQ. Volumes declined on the NYSE and rose on the NASDAQ. All closed at or near their intraday highs. However, no technical events of import occurred, in our view, as all of the recent short term downtrends remain intact and no resistance levels were violated. The data remains a mixed bag of bullish, bearish and neutral readings, leaving no high probability implications for near term market action. As such, we remain near term “neutral/negative” while the intermediate term remains “neutral” due to the opposing forces of generally positive breadth as valuation remains near historically high levels.
- On the charts, the SPX (page 2), DJI (page 2) and COMPQX (page 3) closed higher on the day while the rest were unable to close in the green. And while the intraday reversals from their lows were rather impressive, there were some troubling characteristics involved. While the large cap indexes gained, the NYSE internals were actually negative as the NASDAQ had negative breadth but positive up/down volumes. Advances not supported by positive internals usually leave us suspect of the move, as in this case. And while the SPX, MID (page 4), RUT (page 4) and VALUA (page 5) rallied to their short term downtrend lines, none were actually overcome, thus the trends remain intact.
- The stochastic levels for the SPX, DJI and COMPQX moved out of oversold territory but have not signaled bullish crossovers while the rest remain oversold. On the positive side, the DJT (page 3) may have put in a “hammer” formation suggesting a short term bottom.
- Finally, gold as measured by the GLD (NYSE:GLD) ETF (page 9) and silver appear to have made short term tops as both saw “bearish engulfing patterns” registered on very high trading volume.
- The data remains mixed with all of the 1 day McClellan OB/OS Oscillators still oversold (All Exchange:-55.43 NYSE:-60.89 NASDAQ:-52.42) and psychology generally supportive as the crowd remains long puts with a 1.39 Total and 0.77 Equity Put/Call readings (contrary indicators). The new AAII Bear/Bull Ratio (contrary indicator) is sending the same message at 37.5/25.35. However both the WST Ratio and its Composite are bearish at 69.3 and 162.4 with a neutral OEX Put/Call Ratio (smart money) at 1.03.
- In conclusion, we have yet to see enough evidence appear to alter our near term “neutral/negative” outlook for the indexes.
- Forward 12 month earnings estimates for the SPX from IBES of $125.82 leave a 6.06% forward earnings yield on a 16.5 forward multiple.
SPX: 2,066/2,104
DJI: 17,650/18,058
COMPQX; 4,780/4,969
DJT: 7,523/7,771
MID: 1,452/1,498
RUT: 1,133/1,201
VALUA: 4,539/4,694