McClellan 1 Day OB/OS Oversold
Opinion: The indexes closed lower yesterday with broadly negative internals as volumes rose from the prior session on the NYSE and NASDAQ. More near term uptrend lines were violated, now leaving the bulk of the index trends neutral. The data is sending some encouraging signals for the very near term but deterioration of market breadth, extended valuation and investment advisor complacency suggest to us some degree of caution may still be appropriate.
- On the charts, all of the indexes closed lower yesterday with broadly negative internals on heavy trading volumes. No near term support levels were violated. However, the SPX (page 2), MID (page 4) and VALUA (page 5) closed below their short term uptrend lines. As such, all are now neutral with the two exceptions of the DJI (page 2) and COMPQX (page 3) remaining positive. Breadth is coming more into question as the NYSE cumulative advance/decline line turned neutral with the All Exchange and NASDAQ A/Ds negative. Two other charts are worthy of note as the VIX closed above resistance to 11.62 as did the 10 Year Treasury yield to 2.44%.
- The data is sending some encouraging signals for the very near term as all of the McClellan 1 day Oscillators are oversold with the 21 day levels neutral (All Exchange:-70.92/+16.97 NYSE:+69.73/+26.05 NASDAQ:-70.42/+14.98). The Equity Put/Call Ratio is a mildly bullish 0.71, the Total P/C very bullish at 1.16 and the OEX P/C at a bullish 0.5. The Open Insider Buy/Sell Ratio remains neutral at 36.1.
- Yet while the data may suggest some near term relief, some degree of caution may still be warranted as investment advisor complacency remains high with an Investors Intelligence Bear/Bull Ratio (contrary indicator) a bearish 15.2/60.0, the forward p/e for the SPX based on forward 12 month consensus earnings estimates near a 15 year high at an 18.7 multiple and market breadth yet to show a shift from its current weakening trends.
- Forward 12 month earnings estimates for the SPX from Bloomberg of $136.79 leave a 5.35 forward earnings yield on a 18.7 forward multiple, just shy of a 15 year high.
SPX: 2,547/NA
DJI: 22,403/NA
COMPQX; 6,464/NA
NDX: 5,994/NA
DJT: 9,542/9,986
MID: 1,810/NA
RTY: 1,450/1,512
VALUA: 5,646/5,843