Short-Term Uptrends Unchanged

Data Mostly Neutral

Opinion

The indexes closed mixed yesterday with mildly positive internals on the NYSE and NASDAQ as volumes rose on the NYSE and dipped on the NASDAQ from the prior session. Some new closing highs were achieved on the large cap indexes. No changes were seen on the charts, leaving all of the short term uptrends intact. The data has dropped some of its cautionary signals that are now largely neutral. So while extended market valuation remains a concern, we continue to be of the opinion that the near term trends of the various indexes should be respected until proven otherwise.

• On the charts, the SPX (page 2), DJI (page 2) and COMPQX (page 3) closed higher yesterday as all achieved new closing highs, although the COMPQX new high was fractional in magnitude. The rest of the indexes closed lower on the day. Internals were mildly positive on the NYSE and NASDAQ leaving all of the cumulative advance/decline lines in uptrends and above their 50 DMAs. The same can be said for the seven equity indexes we follow. The fact that all of the stochastic levels are overbought should be noted. Yet we reiterate our opinion that they do not become actionable until bearish crossovers are seen that have yet to occur. Said stochastics can remain overbought for extended periods.

• The data has turned more neutral as the 1 day McClellan Oscillators have moderated with the All Exchange and NYSE levels now neutral (All Exchange:+49.46/+79.63 NYSE:+47.77/+91.95 NASDAQ:+54.06/+72.19). The NADAQ 1 day is mildly overbought while all of the 21 day readings are overbought. Both the Total and Equity Put/Call Ratios are neutral at 0.76 and 0.67 respectively as is the Open Insider Buy/Sell Ratio at 36.7. The OEX Put/Call Ratio has flipped to a bullish 0.39 as the pros have swapped their puts for calls.

• In conclusion, all of the near term trends remain positive on the charts as do the cumulative advance/decline lines, suggesting the trends should continue to be respected. The data is not particularly onerous but extended valuation remains a concern.

• Forward 12-month earnings estimates for the SPX from Bloomberg of $137.37 leave a 5.56 forward earnings yield on a 18.2 forward multiple, over a decade high.
• SPX: 2,460/NA
• DJI: 21,840/NA
• NASDAQ: 6,300/NA
• DJT: 9,234/9,550
• MID: 1,713/1,763
• Russell: 1,414/1,452
• VALUA: 5,519/5,650