McClellan 1 Day OB/OS Oscillators Overbought
Opinion: The indexes closed mixed Friday with positive internals and higher volumes on both exchange. A couple of positive events occurred on the charts as well as some improvement in breadth. However, in spite of the majority of the data at neutral, the 1 day McClellan OB/OS Oscillators have risen to cautionary levels suggesting some digestion of recent progress. As such, we remain neutral for the short term with some degree of weakness expected while remaining mildly positive for the intermediate term, largely due to improved market breadth.
- On the charts The SPX (page 2) and DJI (page 2) closed lower Friday while the rest of the indexes managed to post some gains. Internals and volumes were positive. The RUT (page 4) managed to close above its near term resistance while the VALUA (page 5) closed above its intermediate term downtrend line from its December 2 levels. As well, the MID (page 3) tested resistance while the NYSE Advance Decline Line closed above its 50 DMA. However, all of the stochastic levels are in overbought territory. While they are capable of staying in that range for extended periods, they do suggest some difficulty in notable further progress over the short term. We have yet to see bearish crossover signals generated.
- The data, unfortunately being delayed again resulting in our use of information based on Thursday’s close, finds the 1 day McClellan OB/OS Oscillators overbought across the board (VALUA:+97.77 NYSE:+111.01 NASDAQ:+86.86). We suspect they suggest, at a minimum, some sideways action if not some retracement of the gains seen over the past 2 weeks. The rest of the data is largely neutral including the WST Ratio and its Composite (52.9/131.4), the OEX Put/Call Ratio (smart money) at 1.23 and the AAII Bear/Bull Ratio (contrary indicator) at 31.42/31.19. So, given the OB/OS levels, we find the data tilting slightly negative.
- In conclusion, while the charts remain in their short term uptrends with improving breadth, the McClellan levels are keeping us neutral along with the stochastic readings for the near term. Some digestion of recent gains would not be unusual given the current status. We remain mildly positive for the intermediate term outlook.
- Forward 12 month earnings estimates for the SPX from IBES is $123.12 leaving a 6.32% forward earnings yield with a 15.8 forward multiple.
SPX: 1,903/1,990
DJI: 16,204/17,122
COMPQX; 4,431/4,638
DJT: 7,057/7,513
MID: 1,289/1,346
RUT: 995/1,052
VALUA: 4,062/4,203