1 Day McClellan OB/OS Oscillators Mildly Oversold
Opinion: The bulk of the indexes closed lower yesterday with negative internals on the NYSE and NASDAQ as volumes declined from Friday’s session. The NDX was the only index to advance. The charts remain a mix of neutral and positive trends with mixed cumulative breadth. The data is slightly bullish this morning. As such, we remain of the opinion that the current near term trends of the indexes should continue to be respected until proven otherwise, in spite of what appears to be extended valuation.
- On the charts, all but the NDX closed lower yesterday with negative internals on the NYSE and NASDAQ. The NDX managed to post another new closing high likely due to strong earnings reported Friday from some of its heavily weighted components. The short term trends remain a mix of neutral and positive with the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (page 3) in the positive camp. What strikes us is the selectively of the markets at this stage as the cumulative advance/decline lines for the All Exchange and NASDAQ remain negative and the NYSE A/D neutral. So while the indexes may be advancing, a select group of issues is participating.
- The data is slightly positive with all of the 1 Day McClellan OB/OS Oscillators mildly oversold and the 21 day levels neutral (All Exchange:-57.8/-0.99 NYSE:-56.24/+12.41 NASDAQ:-59.78/-9.06). The OEX Put/Call Ratio is a bullish 0.69 as is the Total Put/Call Ratio (contrary indicator) at 0.94. Psychology is split with the Investors Intelligence Bear/Bull Ratio (contrary indicator) finding the vast majority of advisors on the bullish side of the boat at 15.1/62.3 but the individual investor is not quite as euphoric with a neutral 28.63/38.33 AAII Bear/Bull Ratio.
- Valuation still appears extended with an 18.8 multiple of Bloomberg consensus forward 12 month SPX earnings estimates of $136.79. However, said estimates may rise given some strong earnings recently reported by heavily weighted components.
- We remain of the opinion near term index trends should be respected with the caveat that the market is quite selective regarding participants.
- Forward 12 month earnings estimates for the SPX from Bloomberg of $136.79 leave a 5.35 forward earnings yield on a 18.9 8orward multiple, near a 15 year high.
SPX: 2,547/NA
DJI: 22,774/NA
COMPQX; 6,557/NA
NDX: 5,994/NA
DJT: 9,542/9,986
MID: 1,810/NA
RTY: 1,450/1,512
VALUA: 5,646/5,843