Data Remains Mixed
Opinion: The bulk of the indexes closed lower yesterday with the one exception of the DJT. Internals were mixed on the NYSE while NASDAQ internals were negative as volumes rose on both exchanges from the previous session. No support levels were violated but one chart did close below its short term uptrend line. The reminder of the near term uptrends remain intact. The data remains mixed, yielding no near term implications regarding market direction. As such, we remain of the opinion that the near term uptrends of the various indexes should continue to be respected with the one caveat that valuation appears to be extended as do some index charts as we enter earnings season. Any disappointments in earnings may thus have greater impact than might otherwise be expected.
- On the charts, all of the indexes closed lower yesterday except the DJT (page 4) that made a new closing high. No support levels were violated but the MID (page 4) did close below its near term uptrend line, turning the trend to neutral from positive. As well, the NASDAQ cumulative advance/decline line has also turned neutral. Both the All Exchange and NYSE cumulative A/Ds remain positive with all above their 50 DMAs. The charges of trend noted are not dire in their implications but should be monitored. As a whole, the charts remain broadly positive at this point in time.
- The data remains mixed with the McClellan 1 day OB/OS Oscillators neutral and the 21 day levels overbought (All Exchange:+1.31/+65.35 NYSE:+12.07/+69.22 NASDAQ:-2.71/+60.1). The Total and OEX Put/Call Ratios are bullish at 1.05 and 0.42 respectively while the Equity Put/Call Ratio is a neutral 0.62. The Open Insider Buy/Sell Ratio remains neutral at 50.8.
- In conclusion, while there is little on the charts or data to alter our opinion that the near term uptrends of the indexes should continue to be respected, the facts that the forward valuation of the SPX is at a 15 year high of an 18.6 forward multiple with several charts well above their respective support levels and 50 DMAs, we suspect the markets have priced in a very healthy earnings season that begins shortly. Should the earnings not prove to meet or beat expectations, some greater than expected reaction may ensue.
- Forward 12 month earnings estimates for the SPX from Bloomberg of $137.37 leave a 5.56 forward earnings yield on a 18.6 forward multiple, a decade high.
SPX: 2,508/NA
DJI: 22,403/NA
COMPQX; 6,450/NA
NDX: 5,994/NA
DJT: 9,542/NA
MID: 1,740/NA
RTY: 1,450/NA
VALUA: 5,646/NA