Data Largely Neutral
Opinion: All of the indexes closed higher Monday with positive internals on the NYSE and NASDAQ. Volumes declined from last Thursday’s drop. The charts were largely unaffected regarding their generally negative structures in spite of the gains. The data is largely neutral yielding little projective probabilities. As such, we continue to view the near term outlook for the major equity indexes as “negative”.
- On the charts, all of the indexes closed higher yesterday with positive internals and at or near their intraday highs. However, volumes were quite tepid and well below those of last Thursday as sellers were looking for an exit. We view the volume characteristics as possible signs of a negative shift in supply/demand. While the gains were notable, none of the short term downtrend lines were violated that exist for all of the indexes with the exception of the COMPOQX (page 3) that is neutral. Nor were any resistance levels violated although the COMPQX did manage to close back above its 50 DMA and remains the only index in that condition.
- The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:-16.15/+8.24 NYSE:+12.17/+41.45 NASDAQ:-12.03/-15.99). The Equity Put/Call Ratio is also neutral at 0.63. The OEX Put/Call Ratio still finds the pros looking for further strength at 0.71 while the Total Put/Call Ratio (contrary indicator) has slipped to a mildly bullish 0.85. What remains a concern is while the charts have been turning south, investment advisors are still pounding the table with excess enthusiasm as the Investors Intelligence Bear/Bull Ratio (contrary indicator) finds them more bullish in the face of the trend shifts at 17.5/56.3 as of their most recent reading. Their level of complacency remains a yellow warning light, in our opinion.
- In conclusion, in spite of yesterday’s bounce, we still do not see enough cause to alter our near term “negative” outlook for the major equity indexes.
- Forward 12 month earnings estimates for the SPX from IBES of $134.19 leave a 5.71 forward earnings yield on a 17.5 forward multiple, near a decade high.
SPX: 2,322/2,365
DJI: 20,111/20,740
COMPQX; 5,795/5,923
DJT: 8,757/9,086
MID: 1,677/1,719
RTY: 1,335/1,377
VALUA: 5,342/5,477