Insiders Remain Active SellersOpinion
The indexes closed mixed yesterday with positive internals on the NYSE while the NASDAQ internals were mildly negative. Volumes declined from the prior session on both exchanges as some of the charts yielded possible warning signals. However, no violations of resistance or support were registered, leaving the bulk of the indexes in their ongoing sideways patterns. The data remains a mixed bag but the psychology levels continue to be bothersome, in our opinion. With little change in the overall picture, were are maintaining our near term “neutral” outlook for the major equity indexes while extended forward valuation of the SPX keeps the intermediate term outlook “neutral” as well.
- On the charts, the SPX (page 2) and MID (page 4) posted minor gains yesterday with the balance of the indexes closing lower. NYSE internals were positive with negative internals on the NASDAQ. While no violations of support were registered, leaving the several sideways trading patterns that have been in place since mid-December intact, a couple of possible yellow flags did appear on the charts. Both the DJT (page 3) and RTY (page 4) closed below their respective 50 DMAs while the DJI (page 2) closed below its long term uptrend line going back to February of last year. While these events are worthy of some note, we continue to be of the opinion that violations of support, which have yet to occur, are required to turn the chart pictures more cautionary.
- The data remains mixed with all of the McClellan OB/OS Oscillators staying in neutral territory (All Exchange:-18.38/+28.68 NYSE:-11.77/+40.64 NASDAQ:-22.32/+3.23) as well as the Equity Put/Call Ratio at 0.64. The bullish OEX Put/Call Ratio (smart money) showing the pros long calls and expecting strength is being countered by other psychology data that continues to concern us. Investment advisors measured by the Investors Intelligence Bear/Bull Ratio (contrary indicator) shows an almost complete absence of concern on their part at 17.6/61.8 while the Rydex Ratio (contrary indicator) finds the leveraged ETF traders at one of their highest levels of leveraged long exposure at 70.4. In sharp contrast, insiders continue to be active sellers of their stock at these levels as noted by the 7.3 Gambill Insider Buy/Sell Ratio. An overly enthusiastic crowd when insiders are happy to be selling is a dynamic we have found to be historically troublesome.
- In conclusion, unless we see some resolution on the charts from their narrow sideways patterns, and in spite of psychology concerns, we are inclined to keep our near term “neutral” outlook for the indexes in place.