Data Remains Mostly Neutral
Opinion: The majority of the indexes closed higher yesterday with the exception of the MID (page 4) posting a minor loss following a new closing high in the prior session. Internals were positive with higher volumes on both exchanges as another new closing high was made by one of the other indexes. The data remain largely neutral, as has been the case over the past several sessions. As such, our near term outlook for the indexes remains “neutral/positive” while high SPX forward valuation keeps our intermediate term view at “neutral”.
The bulk of the indexes closed higher yesterday with the exception of the MID posting a minor loss. Positive chart action came from the COMPQX (page 3) that made a new closing high, following the footsteps of the MID in the previous session. All of the short term uptrend lines from early July remain intact although the DJI (page 2), DJT (page 3) and SPX (page 2) are still struggling with their respective resistance levels. However, the series of higher lows from early July, in our opinion, imply increasing demand on dips that may suggest eventual violation of said resistance levels.
We would also note improvements in the gold chart as measured by the GLD (NYSE:GLD) ETF (page 9). After breaking below support 2 weeks ago, the GLD chart broke back above near term resistance, its month long short term downtrend line and its 50 DMA yesterday with respectable trading volumes.
Looking at the data, it continues to send a neutral message as most data points remain neutral. All of the McClellan OB/OS Oscillators remain neutral (All Exchange:+7.74/+30.68 NYSE:+6.12/+38.75 NASDAQ:+8.25/+23.95) as well as the Gambill Insider Buy/Sell Ratio at 11.1. The Equity Put/Call Ratio (contrary indicator) has turned bearish at 0.5 with the crowd long puts while the OEX Put/Call Ratio (smart money) finds the pros seesawing back to heavy put exposure at a very bearish 3.42. However, the frequent wide gyrations of the OEX numbers over the past several sessions have seen little impact on actual market action, thus depleting its predictive power, in our opinion.
In conclusion, given the current state of the charts and data, we are inclined to maintain our “neutral/positive” near term market outlook while the intermediate view remains “neutral” due to high forward SPX valuation.
Forward 12 month earnings estimates for the SPX from IBES of $127.22 leave a 5.82% forward earnings yield on a 17.2 forward multiple.
SPX: 2,160/2,194
DJI: 18,374/18,637
COMPQX: 5,160/NA
DJT: 7,795/7,974
MID: 1,534/NA
RUT: 1,221/1,266
VALUA: 4,904/NA