McClellan 1 Day OB/OS Overbought
Opinion: All of the indexes closed higher Friday with positive internals as volumes declined from the prior session. Most closed near the midpoints of their intraday ranges as several tested their new resistance levels but were unable to violate by the close. The data has turned to a mix of bullish and cautionary readings. As such, given the extent of the recent rally, failures to violate resistance, with one exception, during the session and the mixed signals coming from the data, we are shifting our near term outlook to “neutral” from our prior “neutral/positive” view. Valuation has become stretched again, leaving the intermediate term view “neutral” as well.
- On the charts, all of the indexes closed higher Friday with positive internals as volumes declined from the prior session. The SPX (page 2), MID (page 4) and RUT (page 4) tested their respective resistance levels but were unable to overcome them. The DJT (page 3), however, did break above resistance but remains in both short and long term downtrends. We also now find the stochastic readings for the SPX and DJI in overbought territory. On the positive side, the advance/decline lines for all of the indexes have turned positive and above their 50 DMAs, showing a good improvement in market breadth.
- The data is split. On the cautionary side, we find all of the 1 day McClellan OB/OS Oscillators overbought (All Exchange:+62.1 NYSE:+69.62 NASDAQ:+56.75) and the WSR Ratio and its Composite bearish at 66.8 and 152.0 respectively. Both the Equity and OEX Put./Call Ratios are neutral at 0.57 and 1.14. The most positive data point is coming from the Gambill Insider Buy/Sell Ratio that shows insiders as being very active buyers of recent weakness as it climbed to a bullish 31.9. So, in aggregate, the data scales are fairly evenly balanced.
- In conclusion, we are shifting our near term outlook to “neutral” from “neutral/positive” as new resistance levels are starting to pose some difficulty while the short term OB/OS statistics suggest oversold conditions have shifted to overbought. The forward 12 month p/e for the SPX is back near its historic highs at 16.8, thus keeping our intermediate term outlook “neutral” as well.
- Forward 12 month earnings estimates for the SPX from IBES of $125.54 leave a 5.97% forward earnings yield on a 16.8 forward multiple.
SPX: 2,066/2,109
DJI: 17,599/17,971
COMPQX; 4,797/4,913
DJT: 7,420/7,669
MID: 1,457/1,504
RUT: 1,114/1,161
VALUA: 4,552/4,713