Short Term Outlook Remains “Neutral/Positive”
Opinion: The indexes closed mostly higher yesterday with positive internals as volumes rose slightly from the prior session. The one outlier was the DJT posting a fractional loss. Again, we found no technical events of import being registered on the charts as they continue their recent sideways patterns. The data still consists of a mix of signals that are sending no particularly strong implications regarding near term market movement. As such, our short term view remains “neutral/positive” for the indexes while the intermediate term stays at “neutral” due to forward valuation of the SPX remaining near historically high levels.
On the charts, the bulk of the indexes closed higher yesterday with positive internals and slightly stronger volume. The DJT (page 3) was the only one posting a minor loss. Closing prices were within a mix of intraday ranges as the SPX (page 2), MID (page 4) and RUT (page 4) closed near their midpoints while the DJI (page 2), COMPQX (page 3) and DJT (page 3) closed near the lows of their session. The VALUA (page 5) closed near its intraday high. While early session market strength didn’t fall apart, enthusiasm lost its power as the session wore on. So the charts remain in their current sideways patterns but with a series of lower highs lately. All support levels remain intact.
The data remains mixed. While the 1 day McClellan OB/OS Oscillator for the All Exchange has dropped to a neutral -38.27, the NYSE and NASDAQ levels remain oversold at -80.04 and -87.78 respectively. The WST Ratio/Composite is neutral (42.6/124.0) along with the Equity Put/Call Ratio at 0.69. And while the Gambill Insider Buy/Sell Ratio remains neutral as well, we are seeing some pickup in insider buying as it has risen to 16.2. The OEX Put/Call Ratio (smart money) remains bearish at 2.16 as the pros continue their heavy exposure to puts and expecting weakness. The net result of the data, in our opinion, is that it is all over the proverbial map at this stage and thus uninstructive regarding probable near term market trajectory.
In conclusion, we have yet to see enough evidence to cause a shift in our current “neutral/positive” near term outlook for the major equity indexes. Extended forward valuation for the SPX keeps our intermediate term opinion at “neutral”.
Forward 12 month earnings estimates for the SPX from IBES of $129.10 leave a 6.05 forward earnings yield on a 16.5 forward multiple.
SPX: 2,120/2,171
DJI: 18,078/18,335
COMPQX; 5,172/5,274
DJT: 7,954/8,144
MID: 1,511/1,550
RUT: 1,211/1,238
VALUA: 4,812/4,968