Insiders Increase Buying Activity
Opinion: The indexes closed mixed yesterday with positive internals on the NYSE and mixed internals on the NASDAQ. Volumes declined from the prior session on both exchanges. No technical events of import were registered while the data remains largely neutral. As such, given the technical improvements noted in our last two reports, we remain “neutral/positive” in our short term outlook while the intermediate term remains neutral due to the counterbalancing effects of positive breadth versus high valuation.
- On the charts, the SPX (page 2), DJI (page 2) and COMPQX (page 3) closed higher yesterday as the rest declined. Internals were positive on the NYSE while NASDAQ breadth was negative. No technical events worthy of note were generated from the action. The improvements of downtrend reversals and bullish stochastic crossovers seen over the prior two sessions remain intact, leaving a positive near term tone on the charts.
- The data remains largely neutral including all but one of the McClellan OB/OS Oscillators, that being the 21 day NYSE at an overbought +73.85. The Equity Put’/Call Ratio (0.64), WST Ratio and its Composite (47.8/147.3) remain neutral as well. The only negative signal is coming from the OEX Put/Call Ratio (smart money) that shows the pros still heavily weighted in puts at 2.27 as they expect near term weakness. However, the Gambill Insider Buy/Sell Ratio continues to improve as insiders have been stepping up to the buy window at 23.8. Although the Gambill number is still in neutral territory, it is just shy of a bullish signal and has seen a notable improvement over the past week.
- In conclusion, with the data predominantly neutral while recent technical chart improvements remain intact, our near term view for the markets remains “neutral/positive”. The forward p/e for the SPX remains near the high end of its historical range as market breadth remains positive, thus leaving our intermediate term view at “neutral”.
- Forward 12 month earnings estimates for the SPX from IBES of $125.78 leave a 6.02% forward earnings yield on a 16.6 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