Data Largely Neutral
Opinion: All of the indexes closed lower yesterday, although losses were fractional. Internals for the NYSE were negative while positive on the NASDAQ as volumes declined on both exchanges. There were a couple of minor improvements on the charts while the data remains largely neutral in nature. As such, we continue to view the near term outlook as “neutral/negative”, as discussed in yesterday’s comments, while a needed improvement in breadth keeps our intermediate term view at “neutral”.
- On the charts, all of the indexes closed lower yesterday but movement was minimal in terms of declines, intraday ranges and trading volume. Basically, the markets took a nap. However, there were two technical events suggesting some improvement as the VALUA (page 5) closed above its short term downtrend line with the DJT (page 3) doing so as well, but by a narrow margin. The bulk of the stochastic readings remain below their midpoints suggesting no overbought conditions exist at this point. Stochastic theory would suggest that since we have recently seen multiple bullish crossovers from oversold levels, overbought levels should be registered over the near to intermediate term, offering some positive tone at present.
- The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:-30.22/-24.68 NYSE:-45.79/-4.29 NASDAQ:-12.4/-48.59). The majority of the put/call ratios are also neutral, including the OEX Put/Call (smart money) at 1.06. What we continue to find of interest is the continued increase in insider buying activity. The Gambill Insider Buy/Sell Ratio finds insiders having again increased their appetite for their own stock to a bullish 30.7. They continue to take advantage of price weakness as a buying opportunity.
- In conclusion, although the charts and data remain mostly neutral in nature, we remain of the opinion that some underlying strength is beginning to emerge, given light trading activity, trend reversals insider activity and generally neutral data. Thus we remain near term “neutral/positive”.
- The intermediate term still needs to see a more notable improvement in breadth. As such, that outlook remains “neutral”.
- Forward 12 month earnings estimates for the SPX from IBES of $124.52 leave a 6.08% forward earnings yield on a 16.4 forward multiple.
SPX: 2,039/2,083
DJI: 17,245/17,761
COMPQX; 4,710/4,832
DJT: 7,433/7,662
MID: 1,423/1,469
RUT: 1,094/1,129
VALUA: 4,447/4,559