Data Remains Neutral
Opinion: The indexes closed mixed last Thursday with mildly positive internals as volumes rose on the NYSE and declined on the NASDAQ. The price action was fairly subdued as all of the indexes closed at or near their intraday highs. No major technical events were generated while the data remains fairly evenly balanced and implying, in our opinion, that the recent sideways action of the markets is likely to continue for the near term. Improving market breadth remains a positive for the more intermediate term although valuation has crept back towards historically high levels leaving us “neutral/positive” for that timeframe.
- On the charts, most of the indexes managed to generate some modest gains Thursday with only the SPX (page 2) and DJT (page 3) losing ground. Internals were mildly positive on modest trading volumes. All closed at or near their intraday highs. No support or resistance levels were violated although COMPQX and DJT saw bearish stochastic crossover signals generated. Their charts have yet to confirm those signals. So the recent sideways consolidation action of the indexes continued for another day.
- The data remains fairly evenly split with all of the 1 day McClellan OB/OS Oscillators remaining neutral (All Exchange:-7.15 NYSE:-7.42 NASDAQ:-5.79). The recent AAII Bear/Bull Ratio as of 3/24 remains neutral as well at 23.71/33.78. The Put/Call ratios are split with the Total and Equity Put/Calls (contrary indicators) showing the crowd long puts at 1.06 and 0.82 while the OEX Put/Call Ratio (smart money) finds the pros flipping once again and now very heavy in puts at 2.85. As such, they cancel each other out in terms of predictive implications. The Gambill Insider Buy./Sell Ratio remains stuck at a neutral 22.2. Thus the data is yielding no strong market forecasting probabilities for the short term.
- In conclusion, both the charts and data are implying the recent sideways action of the indexes has the higher probability of continuing for the short term. Improving market breadth is positive for the intermediate term but valuation is now approaching historically high levels leaving us “neutral/positive” in that regard.
- Forward 12 month earnings estimates for the SPX from IBES of $123.12 leave a 6.05% forward earnings yield on a 16.5 forward multiple.
SPX: 2,005/2,076
DJI: 17,009/17,712
COMPQX; 4,715/4,924
DJT: 7,536/8,150
MID: 1,389/1,428
RUT: 1,065/1,107
VALUA: 4,320/4,586