Data Remains Largely Neutral
Opinion: Our next report will be on Tuesday, June 31. All of the indexes closed higher yesterday with positive internals as volumes rose on the NYSE and declined slightly on the NASDAQ. All closed at or near their intraday highs with more positive chart signals generated. Even with the advances, the data remains largely neutral and has yet to suggest a shift from the recent strength. Thus we remain near term “neutral/positive” as well as for the more intermediate term that is seeing an improvement in breadth. Valuation, however, is approaching somewhat extended levels again.
- On the charts, all of the indexes closed higher yesterday with positive internal action. Further technical improvements were registered on the charts as follows.
- The SPX (page 2) closed above short term resistance.
- The DJI (page 2) closed above resistance as well as its short term downtrend line and 50 DMA.
- The COMPQX (page 3) closed above resistance.
- The DJT (page 3) closed above its 200 DMA while the VALUA (page 5) closed above resistance as well.
- We also saw the NYSE advance/decline line post a higher high signaling further expansion in breadth.
- The COMPQX, MID and RUT are now overbought on their respective stochastic readings as speculated in yesterday’s comments. However, said overbought conditions can exist for extended periods. Thus they are not a major concern at this point, in our opinion.
- The data remains largely neutral in spite of the recent market strength. All but one of the McClellan OB/OS Oscillators remain neutral (All Exchange:+30.76/-2.6 NYSE:+17.87/+16.32 NASDAQ:+50.09/-22.96). Only the NASDAQ 21 day is mildly overbought. The Equity Put/Call Ratio (0.62) along with the WST Ratio and its Composite (55.9/137.4) are neutral as well. The Gambill Insider Buy/Sell Ratio, although slipping a bit, remains bullish at 26.0. The only cautionary signal is coming from the OEX Put/Call Ratio (smart money) showing the pros now long puts at 1.44. Thus the overall view of the data appears to be benign for now.
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- In conclusion, improvements in the charts in combination with the data keep us “neutral/positive” for the near term. The same holds true for the intermediate term due to better breadth but valuation is starting to creep higher.
- Forward 12 month earnings estimates for the SPX from IBES of $124.52 leave a 5.96% forward earnings yield on a 16.8 forward multiple.
SPX: 2,057/2,100
DJI: 17,527/17,922
COMPQX; 4,771/4,927
DJT: 7,476/7,823
MID: 1,439/1,483
RUT: 1,103/1,146
VALUA: 4,519/4,665