VIX Still Near Historic Lows
Opinion: The major indexes closed mixed yesterday with negative internals for the NYSE while the NASADQ had positive advance/decline but negative up/down volumes. Volumes rose on both exchanges from the prior session. No significant technical events occurred on the charts while the data is now generally neutral in nature. However, the VIX remains near historic lows suggesting the potential for some volatility reentering the markets. As such, we remain near term “neutral” for the indexes while forward valuation of the SPX is back to historic highs, leaving the intermediate term view “neutral” as well.
On the charts, the indexes closed mixed with the SPX (page 2), DJI (page 2) COMPQX (page 3) and MID (page 4) closing fractionally higher as the DJT (page 3), RTY (page 4) and VALUA (page 5) closed lower on the day. Volumes rose on both exchanges with generally negative intervals. No major technical events were registered on the charts. However, the RTY (page 4) did close below its short term uptrend line, following the action of some of the other indexes of late. We would also note the stochastic levels appear to be rolling over from much overbought levels across the board. Yet they are not yet actionable due to their lack of bearish crossover signals. As well, the VIX (page 9), which violated its short term downtrend line Monday, remains near historic lows suggesting the potential for some volatility to reemerge over the near term.
The data has moderated back to largely neutral signals including the majority of the McClellan OB/OS Oscillators (All Exchange:+45.94/+37.48 NYSE:+41.75/+32.85 NASDAQ:+43.64/+53.89). Only the 21 day NASDAQ OB/OS is overbought. The Equity and OEX Put/Call Ratios are neutral at 0.62 and 1.38 respectively. The Gambill Insider Buy/Sell Ratio remains stuck in neutral at 11.3 as well.
In conclusion, the weight of the evidence implies a “neutral” outlook for the near term as the indexes may well be entering a period of consolidation post the magnitude of the recent rally. Some retracement of gains would also be far from unusual. The forward valuation of the SPX back to historic highs keeps the intermediate term view “neutral” as well.
Forward 12 month earnings estimates for the SPX from IBES of $129.72 leave a 5.86 forward earnings yield on a 17.1 forward multiple.
SPX: 2,182/NA
DJI: 18,862/NA
COMPQX; 5,242/NA
DJT: 8,736/9,140
MID: 1,583/NA
RTY: 1,300/NA
VALUA: 5,094/NA