Data Turns Mildly Positive
Opinion: Our next report will be issued on Thursday, May 12. The indexes closed mixed yesterday with negative internals on the NYSE and mixed internals on the NASDAQ. Volumes declined on both exchanges from the prior session. There were a couple of mildly positive chart events that occurred although no resistance levels were violated. The data has turned mildly positive as well. However, the setup is not quite encouraging enough to alter our near term “neutral” outlook for the indexes although it is close to doing so. The intermediate term outlook remains “neutral” largely due to valuation remaining near historically high levels.
- On the charts, the indexes closed mixed on the day. A couple of technical events occurred offering some possible encouragement in the following fashion. The SPX (page 2), DJI (page 2) and MID (page 4) all saw bullish stochastic crossovers triggered. However, while encouraging, the charts have yet to confirm the signals. Also, the SPX and DJT (page 3) closed marginally above their short term downtrend lines. So while we are seeing some hopeful signs of potential strength, they are not substantial enough to cause a shift in opinion at this stage.
- The data has seen some slight improvement as all of the put/call ratios are positive. The Total and Equity Put/Call Ratios (contrary indicators) still find the crowd scared and long puts at 1.14 and 0.86 while the OEX Put/Call Ratio (smart money) that has been very volatile of late has flipped back to a mildly bullish 0.97 as the pros have been recently buying calls. All of the McClellan OB/OS 1 day Oscillators remain in oversold territory, although not extremely so (All Exchange:-54.53 NYSE:-51.39 NASDAQ:-59.51). The Gambill Insider Buy/Sell Ratio remains neutral at 18.7. So the data is giving a glimmer of encouragement at present.
- In conclusion, while we have seen some budding improvement in the charts and data, said improvements are not strong enough to alter our near term “neutral” view.
- For the intermediate term, we remain “neutral” as the IBES forward 12 month earnings estimates for the SPX of $122.95 leave market valuation in the upper end of its historical range.
- Forward 12 month earnings estimates for the SPX from IBES of $122.95 leave a 5.97% forward earnings yield on a 16.7 forward multiple.
SPX: 2,044/2,091
DJI: 17,553/17,972
COMPQX; 4,716/4,888
DJT: 7,607/7,955
MID: 1,435/1,466
RUT: 1,107/1,162
VALUA: 4,499/4,631