Some 50-DMAs Violated Again

Data Turns More Positive

Opinion

The majority of the indexes closed lower yesterday with the exception of the DJT closing higher. Internals were negative as volumes rose from the prior up session. All but the DJT closed at or near their intraday lows with all closing below their 50 DMAs. However, no support levels were violated. The data has turned more positive, including insider buying activity. Yet we are of the opinion that the charts are in need of improvement, in spite of the bullish data, in order to alter our near term “neutral” outlook. The intermediate term remains “neutral” as well, given the poor state of the advance/decline lines in need of better exhibition of breadth.

• On the charts, the only index to close higher yesterday was the DJT (page 3). The rest closed lower with the SPX (page 2), DJI (page 2), MID (page 4), RUT (page 4) and VALUA (page 5) closing back below their 50 DMAs. However, while some closed on support, no support levels were violated. As such, the technical picture was little changed, leaving all of the near term downtrends intact.

• The data, on the other hand, continues to improve. All of the 1 day McClellan OB/OS Oscillators are in oversold territory (All Exchange:-57.98 NYSE:-50.61 NASDAQ:-68.77), but the NYSE only mildly so. The put/call ratios have shifted positive with the Total and Equity P/C Ratios (contrary indicators) finding the crowd back in a fearful state and heavy in puts at 1.21 and 0.81 respectively while the OEX Put/Call Ratio (smart money), that saw the pros heavy in puts yesterday, now finds the pros slightly weighted to calls at a mildly bullish 0.94. The ISEE Put/Call Ratio (contrary indicator) at -12.5 has shifted to a bullish tone as well while the Gambill Insider Buy/Sell Ratio has finally officially turned a bullish 28.8 as insiders continue to take advantage of lower prices as a buying opportunity. As such, the data is now largely positive.

• In conclusion, although the data is encouraging, we still need to see some positive response from the charts to alter our near term “neutral” outlook for the indexes.

• For the intermediate term, we remain “neutral”, although valuation has moderated to some degree, due to a needed improvement in breadth.
• Forward 12-month earnings estimates for the SPX from IBES of $124.35 leave a 6.07% forward earnings yield on a 16.5 forward multiple.
• SPX: 2,039/2,083
• DJI: 17,480/17,947
• NASDAQ: 4,716/4,832
• DJT: 7,433/7,662
• MID: 1,423/1,469
• Russell: 1,094/1,129
• VALUA: 4,499/4,631