Data Remains Mixed
Opinion: While the near term uptrends of the major equity indexes remain intact, we continue to be of the opinion that both the charts and data are suggesting the short term outlook for the major indexes is neutral with a slightly negative bias.
- On the charts, as stated above, the short term uptrends for all of the indexes have yet to be violated and, as such, should be respected until proven otherwise. However, there are a few minor issues worth mentioning, in our opinion. While the COMPQX (page 3) was the only index that managed to post a gain yesterday, its internals were actually negative as volumes declined. It also made a “doji” formation (opening and closing at or near the same levels) that some interpret as a sign of possible exhaustion of a rally. It would need to close lower today for confirmation. The DJT (page 3) was the poorest performer but managed to bounce off of its short term uptrend line. Finally, the RUT (page 4) formed a bearish engulfing pattern as it rallied to but failed to surpass its short term resistance level.
- All of these issues may same as minutia and, granted, we may have gone “microscopic”. None of these points are glaring issues. However, our desire to evaluate current conditions sometimes leads to what may border on hair splitting.
- The data remains mixed with a slight negative bias. The 21 day McClellan OB/OS Oscillators are overbought for the NYSE and NASDAQ (+82.2/+52.23) while the 1 day levels are neutral (+12.04/+29.07). The WST Ratio is a neutral 58.6 while its Composite is a bearish 159.6. The Equity Put/Call Ratio (contrary indicator) is bearish at .54 along with the Rydex Ratio (contrary indicator) that is back to a very bearish 1.49. Lastly, although neutral, insiders have been backing off from buying their stock measured by the Gambill Insider Buy/Sell Ratio as the level has slipped from 14% to 10% as of 6/20.
- In short, the markets are doing a balancing act with a slight negative bias, in our opinion.
- For the longer term, we remain bullish on equities as they remain undervalued with a 6.37 forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $125.11 versus the 10 Year Treasury yield of 2.62%.
See Attached PDF