Data Leaning Positive
Opinion: The only index able to post gains on Friday was the DJT. The rest closed lower at varying points within their intraday ranges. Some technical levels were tested on the charts but no events of import were generated, in our opinion. The data, while still sending some warning signals, has taken on a slightly positive message for the short term. Unfortunately, none of these events are sufficient to alter our near term “neutral/negative” view for the major equity indexes while the intermediate term outlook remains “neutral”.
· On the charts, the only index to close higher Friday was the DJT (page 3) as the rest closed lower at varying points within their intraday ranges. Breadth and volumes were negative. Both the SPX (page 2) and DJI (page 2) tested support while the DJT tested its short term downtrend line but failed to violate. We would note the stochastic levels for the MID (page 4) and VALUA (page 5) have reached oversold conditions. However, no bullish stochastic crossover signals have yet been generated to make the signals actionable. All of the advance decline lines remain negative as well. We reiterate our opinion that more positive chart action is necessary in order to become more optimistic for the technical picture.
· The data has turned slightly positive with all but the All Exchange and NYSE 21 day McClellan OB/OS Oscillators in oversold territory (All Exchange:-70.7/-48.86 NYSE:-67.31/41.61 NASDAQ:-76.64/-54.17). The WST Ratio/Composite is bullish (21.5/90.6) as well as the Equity Put/Call Ratio (0.78) and new AAII Bear/Bull Ratio, contrary indicator, (34.07/24.75) still showing the crowd mostly in the bearish camp. The Gambill Insider Buy/Sell Ratio has improved to 19.0 but remains neutral. The negative signal that stands out is the OEX Put/Call Ratio (smart money) that finds the pros extremely weighted in puts at 4.32 and expecting weakness.
· In conclusion, we have yet to see enough improvement in the charts, market breadth and data to alter our near term “neutral/negative” short term view for the major equity indexes. High forward valuation for the SPX leaves our intermediate outlook at “neutral”.
· Forward 12 month earnings estimates for the SPX from IBES of $128.91 leave a 6.0 forward earnings yield on a 16.6 forward multiple.
SPX: 2,120/2,171
DJI: 18,078/18,335
COMPQX; 5,167/5,282
DJT: 7,954/8,144
MID: 1,490/1,534
RTY: 1,190/1,235
VALUA: 4,748/4,897