COMPQX Makes New Closing High
Opinion: The bulk of the indexes closed higher yesterday with the exception of the DJI. Internals were positive on both exchanges as volumes rose on the NYSE and fell on the NASDAQ. The COMPQX made a new closing high while most of the indexes remain in their sideways patterns that have been in force since mid-December. The data remains largely neutral with a couple of cautionary signals. So, given the state of the charts and data, we have yet to see a sufficient shift in the weight of the evidence to alter our near term “neutral” outlook for the major equity indexes, in spite of some concerns. Extended valuation of the SPX at historic highs keeps the intermediate term view “neutral” as well.
On the charts, all but the DJI (page 2) closed higher yesterday with the COMPQX (page 3) making another new closing high. However, most of the large cap indexes closed near their intraday lows, giving up earlier session gains. While not actionable at this point, the SPX (page 2) flashed a “bearish stochastic crossover” signal. As such, the short term trends of the various indexes remain intact with only the COMPQX in an uptrend. The rest are neutral while the DJT (page 3) remains in a short term downtrend at this point in time. Only the COMPQX has made measurable progress over the past month. The VIX (page 9) remains near its 12 month lows suggesting the potential of some volatility reentering the markets.
The data remains largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+4.46/+15.2 NYSE:+18.35/+28.84 NASDAQ:+2.95/+1.54). The Equity Put/Call Ratio (contrary indicator) is also neutral at 0.64. On the other hand, the OEX Put/Call Ratio (smart money) finds the pros heavy in puts at 1.86 and expecting some near term weakness.
As mentioned in recent reports, we remain concerned regarding the extent of investor bullish sentiment via the AAII Bear/Bull Ratio at 25.23/46.2 and Investors Intelligence Bear/Bull Ratio at 18.4/60.2. Both of these contrary indicators show a high degree of complacency on the part of the crowd, in our opinion. While no sell signals have been generated on the charts, having too many bulls may prove to be problematic when their attitude shifts.
In conclusion, while we do have some concerns regarding the near term, until sell signals are generated on the charts, we are forced to continue with our near term “neutral” outlook for the major equity indexes.
Forward 12 month earnings estimates for the SPX from IBES of $130.93 leave a 5.75 forward earnings yield on a 17.3 forward multiple, a 12 year high.
SPX: 2,237/NA
DJI: 19,735/19,975
COMPQX; 5,432/NA
DJT: 8,908/9,157
MID: 1,659/1,690
RTY: 1,352/1,388
VALUA: 5,262/5,388