Some Minor Deterioration On Charts

Data Mixed

Opinion

All of the indexes closed lower yesterday with broadly negative internals on the NYSE and NASDAQ as volumes rose on the NYSE from the prior session while NASDAQ volumes dipped. No support levels or uptrend lines were violated at the close, leaving said trends intact. The data is a bundle of mixed signals yielding no particularly strong indication as to near term probabilities for the indexes. Forward 12 month earnings estimates for the SPX were lifted again, this time to $154.35. As such, we remain of the opinion that the near term trends of the equity indexes should continue to be respected until proven otherwise while noting the weight of the evidence has shifted ever so slightly to some degree of caution possibly forthcoming.

• On the charts, all of the indexes closed lower yesterday with broadly negative internals. All closed at or near their intraday lows. While no trend lines or support levels were violated, the MID (page 4) did flash a “bearish stochastic crossover” signal that has yet to become actionable, in our opinion. All of the indexes remain in their current near term uptrends with the one exception of the DJT (page 4) that is neutral. The All Exchange advance/decline line has turned neutral as well while those for the NYSE and NASDAQ remain positive. We would also note the yield on the 10-year Treasury has risen 70 basis points since early December to 2.7% that may begin to present a competitive drag on equities.

• The data is mixed. The 1 day NYSE McClellan OB/OS Oscillator is oversold with the rest remaining at neutral levels (All Exchange:-38.93/+31.07 NYSE:-57.11/+27.65 NASDAQ:-18.47/+39.09). The Total and Equity Put/Call Ratios are neutral at 0.74 and 0.57 respectively while the OEX Put/Call Ratio is a mildly bullish 0.96. The OpenInsider Buy/Sell Ratio has ticked up to 39.2 but remains neutral while the new Investors Intelligence Bear/Bull Ratio (contrary indicator) remains very cautionary at 12.8/64.7 with too many bulls. Consensus forward 12 month earnings estimates for the SPX from Bloomberg rose to $154.35. As such, the forward p/e for the SPX remains at an 18.5 multiple in spite of the rally.

• In conclusion, we continue to respect the chart trends until proven otherwise.

• Forward 12-month earnings estimates for the SPX from Bloomberg were raised to $154.35, leaving a 5.4 forward earnings yield on a 18.5 forward multiple.
• SPX: 2,798/NA
• DJI: 25,950/NA
• NASDAQ: 7,217/NA
• NDX: 6,805/NA
• DJT: 10,582/11,203
• MID: 1,957/NA
• Russell: 1,550/NA
• VALUA: 6,270/NA