Data Remains Largely Neutral
Opinion: The majority of the indexes, with the exception of the DJT, closed higher yesterday with positive internals as volume rose from the prior session on both exchanges. The early, weak opening saw enough buying interest to turn the tide by the close. The charts saw a couple of minor improvements, discussed below, while the data remains largely neutral. As such, we are maintaining our near term “neutral” outlook for the major indexes at this point in time.
- On the charts, all but the DJT (page 3) closed higher yesterday with positive internals on good volume. Early market weakness was eventually overcome with enough demand to move the indexes into the black. The COMPQX (page 3) and VALUA (page 5) both managed to close back above their 50 DMAs leaving only the DJT below that level. The SPX (page 2), DJI (page 2) and COMPQX formed “bullish engulfing” candlestick patters adding a slight positive. However the COMPQX and DJT both remain below their short term downtrend lines. So there was some improvement but none that we would regard as of significant note.
- The data remains mostly neutral including all of the McClellan OB/OS Oscillators (All Exchange:+29.65/+13.26 NYSE:+30.89/+38.86 NASADAQ:+29.09/-14.37). The OEX Put/Call Ratio (smart money) shows the pros neutral at 1.36, having shifted from their prior bearish exposure to puts. The Total and Equity Put/Call Ratios (contrary indicators) still find the crowd nervous and long puts at 1.01 and 0.76 respectively. And while the Gambill Insider Buy/Sell Ratio has dipped, it remains in bullish territory at 27.9. Thus the data has no strong indication of near term trajectory for the indexes at this point, in our view.
- In conclusion, while the indexes were able to reverse the opening weakness yesterday, and some chart improvements were registered, no violations of resistance occurred. When adding the data to the analysis, we are inclined to maintain our near term “neutral” outlook for the markets as well as for the intermediate term that is hampered by historically high valuation.
- Forward 12 month earnings estimates for the SPX from IBES of $125.35 leave a 5.97% forward earnings yield on a 16.8 forward multiple.
SPX: 2,066/2,109
DJI: 17,599/17,971
COMPQX; 4,797/4,913
DJT: 7,420/7,669
MID: 1,457/1,504
RUT: 1,114/1,161
VALUA: 4,552/4,713