Opinion: Our next comment will be Tuesday, September 6. All of the indexes closed lower yesterday with negative internals and higher trading volumes on both the NYSE and NASDAQ. However, the damage on the charts was minimal as only one short term uptrend line was violated while some support levels were tested successfully. Their neutral to slightly positive trends remain intact at this point. The data scales remain evenly balanced with a mix of neutral, bullish and bearish signals. As such, yesterday’s action was insufficient, in our opinion, to alter our near term “neutral/positive” view for the indexes while the intermediate term remains “neutral” due to high SPX valuation.
- On the charts, all of the indexes closed lower with negative internals and higher volume yesterday. Closing prices were a mix of middle to upper end of intraday ranges. The SPX (page 2), DJI (page 2) and VALUA (page 5) saw successful testes of their respective support levels but the DJI did close below its short term uptrend line. All of the advance decline lines remain positive with the exception of the % SPX stocks trading above their 50 DMAs again making a lower low. We remain of the opinion that the mid and small cap indexes are displaying better technical action.
- We would also note that gold, as viewed by the GLD (NYSE:GLD) ETF chart (page 9), closed below support as well as its long term uptrend line with potential of now closing a downside gap as noted on the chart.
- The data has shifted around but still remains neutral, given the mix of the signals. All of the McClellan OB/OS Oscillators are neutral (All Exchange: -36.02/+36.42 NYSE:-44.66/+44.39 NASDAQ:-25.96/+31.59) along with the WST Ratio/Composite (43.2/121.6) and Gambill Insider Buy Sell Ratio (13.0). The Put/Call Ratios are counterbalancing with the Total and Equity Put/Call (contrary indicators) finding the crowd nervous and long puts at 1.2 and 0.7 while the pros are sending a very bearish OEX Put./Call Ratio reading of 3.18 as they are now very heavy in puts and expecting some weakness. The net result for the data is that there continues to be a lack of consensus regarding near term projections, thus remaining neutral and uninstructive.
- In conclusion, in spite of yesterday’s weakness, we have yet to see what would be enough evidence to alter our near term “neutral/positive” view for the indexes in either direction, while high forward valuation of the SPX keeps us “neutral” for the intermediate term.
- Forward 12 month earnings estimates for the SPX from IBES of $127.22 leave a 5.86% forward earnings yield on a 17.1 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