Some Indexes Change Short-Term Trend

Data Slightly Positive

Opinion

The indexes closed mixed Friday with negative internals on the NYSE while NASDAQ internals were positive. Volumes declined from the prior session. Since our last report on 11/7, there have been some changes on the charts including some shifts in short term trend for some of the major indexes discussed below. Meanwhile, the data has taken on a slightly positive tone suggesting some pause in the weakness experienced over the past few sessions. Our short term outlook has become a bit more mixed as some of the trends have shifted while others remain intact as detailed below. Valuation remains a concern.

• On the charts, the indexes closed mixed Friday with the COMPQX (page 3), RTY (page 5) and VALUA (page 5) closing up as the rest declined. Internals were negative on the NYSE and positive on the NASDAQ. Here is how the individual indexes appear at this point. The SPX (page 2) remains in a near term uptrend but has flashed a bearish stochastic crossover signal. The DJI (page 2) trend has shifted from positive to neutral having violated its near term uptrend line last Thursday. It is also on a bearish stochastic crossover signal. The COMPQX and NDX (page 3) remain in their short term uptrends while the DJT (page 4) is now in a short term downtrend having broken support last Tuesday. As well, it is now trading below its 50 DMA. The MID (page 4) near term trend has turned neutral from positive having broken its trend line last week while the RTY is now in a short term downtrend. The VALUA short term trend remains neutral. There have been some shifts in breadth as well with both the All Exchange and NASDAQ cumulative advance/decline lines now negative with the NASDAQ’s below its 50 DMA. The NYSE cumulative A/D is neutral. As such, the shifts in trend and breadth suggest a somewhat more cautious approach is warranted.

• The data, however, is slightly positive, implying a possible pause in the recent weakness. The All Exchange and NASDAQ 1 day McClellan OB/OS Oscillators are now mildly oversold with the balance neutral (All Exchange:-52.71/-27.22 NYSE:-49.1/-12.25 NASDAQ:-53.14/-38.86). The Total Put/Call Ratio (contrary indicator) is a very bullish 1.18 with the crowd buying puts while the OEX P/C is a very bullish 0.56 as the pros are buying calls. The balance of the data is mostly neutral.

• In conclusion, valuation remains a concern while the charts are suggesting a bit more caution is warranted.

• Forward 12-month earnings estimates for the SPX from Bloomberg of $136.79 leave a 5.35 forward earnings yield on a 18.9 forward multiple, a 15-year high.
• SPX: 2,547/NA
• DJI: 23,314/NA
• Nasdaq: 6,557/NA
• NDX: 5,994/NA
• DJT: 9,380/9,750
• MID: 1,810/1,843
• Russell: 1,450/1,489
• VALUA: 5,646/5,843