Data Unavailable
Opinion: All of the indexes closed higher yesterday with positive internals as volume s declined on the NYSE and rose on the NASDAQ. Closing prices were at various points within their intraday ranges. While no sell signals were generated on the charts, we remain of the opinion that both the trajectory and size of the recent rally leave the markets ripe for some consolidation/retracement of the gains. As such, we remain “neutral/negative” for the near term outlook. The data is unavailable this morning but is likely little changed from yesterday’s somewhat cautionary readings.
- On the charts, all of the indexes closed higher yesterday with positive internals. The NASDAQ saw volumes rise from the prior session. However, volumes declined on the NYSE, again suggesting a lessening of overall demand. No technical events of import were generated, in our opinion. However, while no sell signals were registered, we remain of the opinion that the recent rallies are of great enough extent as well as vertical in nature that some consolidation/retracement of the gains has a reasonably high probability. Granted, we are making our assumptions without current technical support via chart sell signals. But given the implications of “normal” Fibonacci retracements, a typical 38.2% retracement of the trough to peak rally in the DJI (page 2), as an example, would result in an almost 600 point giveback. Said potential giveback has the potential to happen very quickly, given the nearly vertical slope of the rally. Thus, we simply cannot justify near term enthusiasm given what we view as the current risk/reward for the major indexes.
- The data is unavailable this morning but likely little changed from its prior somewhat cautionary tone.
- In conclusion, we remain of the opinion that near term risk outweighs reward for the major indexes. As well, the forward P/E for the SPX at decade highs bears consideration.
- Forward 12 month earnings estimates for the SPX from IBES of $126.29 leave a 5.84% forward earnings yield on a 17.1 forward multiple.
SPX: 2,119/NA
DJI: 18,026/NA
COMPQX; 4,971/5,104
DJT: 7,878/8,104
MID: 1,518/1,550
RUT: 1,177/1,210
VALUA: 4,753/4,895