McClellan OB/OS Oscillators Still Neutral
The bulk of the indexes closed higher Monday with the exception of the NDX posting a minor loss. Internals were positive on the NYSE and NASDAQ as volumes declined from those of the prior session. Overall market breadth has improved while the charts saw a combination of some new closing highs and violations of short term resistance levels. The data is mixed but finds the McClellan OB/OS levels remaining in neutral territory. As such, given the state of the charts and data, we are maintaining our near term “positive” outlook for the major equity indexes.
- On the charts, only the NDX (page 3) closed lower yesterday as the rest advanced. Internals were positive on both exchanges but trading volumes continued to decline. Positive technical events occurred on the MID (page 4) and VALUA (page 5) as both closed above resistance to new closing highs while the SPX (page 2) and DJI (page 2) closed above resistance as well. So now only the COMPQX (page 3), NDX and RTY (page 5) are in neutral sideways patterns while the rest are in short term uptrends. The cumulative advance decline lines for the All Exchange, NYSE and NASDAQ are now all positive and above their 50 DMAs as resent strength has been accompanied by improved breadth.
- The data is mixed but still finds all of the McClellan OB/OS Oscillators in neutral territory (All Exchange:+30.86/+11.25 NYSE:+44.45/+34.28 NASDAQ:+20.58/-6.22). The Total Put/Call Ratio (0.79), Open Insider Buy/Sell Ratio (39.0) and new AAII Bear/Bull Ratio (30.67/33.67) are neutral as well. The Equity P/C (0.55) is mildly bearish while the OEX P/C is a very bearish 3.93 as the pros are now loaded up in puts and expecting some near term weakness. Valuation finds consensus forward 12 month earnings estimates for the SPX at $169.02, leaving the forward 12-month p/e for the SPX at 16.9 versus the “rule of 20” implied fair value of a 17.2 multiple. The “earrings yield” stands at 5.92%.
- In conclusion, the fact that breadth has improved while resistance levels are being violated in conjunction with a lack of overbought conditions suggests it is appropriate to maintain our near term positive outlook for the major equity indexes..
- SPX: 2,790/2,863
- DJI: 25,000/26,052
- NASDAQ: 7,786/7,936
- NDX: 7,294/7,507
- DJT: 11,114/11,370
- MID: 1,987/NA
- Russell: 1,654/1,712
- VALUA: 6,455/NA