McClellan 1 Day OB/OS Neutral
Opinion: All of the indexes closed lower yesterday with negative internals as volumes rose on the NYSE and declined on the NASDAQ. Most closed near the midpoints of their intraday ranges. No support levels were violated but some 50 DMAs were broken. The data remains fairly evenly balanced and not yielding a strong near term probability in either direction. As such, given the extent of the recent rally, we remain “neutral” for the near term and of the opinion that the indexes are in a period of near term consolidation of the recent gains.
- On the charts, all of the indexes closed lower with negative internals. Most closed near their intraday midpoints with the exceptions of the RUT (page 4) and VALUA (page 5). While no support levels were broken, both the COMPQX (page 3) and VALUA closed below their 50 DMAs. The DJT (page 3), unfortunately, remains the poorest looking of the indexes as it remains below its 50 and 200 DMAs as well as its short and long term downtrend lines. As such, we believe the bulk of the charts are suggesting they are currently in a consolidation phase post the recent and notable rally. Tests of new support levels, listed below, may be in the cards for the short term.
- The data remains evenly split. All of the McClellan OB/OS Oscillators are now neutral (All Exchange:+16.21/+17.58 NYSE:+18.55/+42.16 NASDAQ:+13.78/-9.11). Both the Total and Equity Put/Call Ratios (contrary indicators) show the crowd increasingly nervous and long puts at 1.24 and 0.73 respectively. They are being counterbalanced by the OEX Put/Call Ratio (smart money) that shows the pros long puts as well at 1.78 and expecting near term weakness. The Gambill Insider Buy/Sell Ratio remains encouraging at 31.9. Thus the data scales are too evenly balanced to imply a probable near term trajectory for the indexes.
- In conclusion, while the futures imply a weak opening this morning, we remain “neutral” in our near term outlook and of the opinion that the higher probability, based on the charts and data, is that the markets are in a consolidation period post the sizable and quick rally off of the recent lows. Valuation near historical highs keeps us “neutral” for the intermediate term.
- Forward 12 month earnings estimates for the SPX from IBES of $125.54 leave a 6.01% forward earnings yield on a 16.6 forward multiple.
SPX: 2,066/2,109
DJI: 17,599/17,971
COMPQX; 4,797/4,913
DJT: 7,420/7,669
MID: 1,457/1,504
RUT: 1,114/1,161
VALUA: 4,552/4,713