Data Mixed
Opinion: Most of the indexes closed lower yesterday, the exception being the DJI (page 2), with negative internals as volumes rose from the prior session. Some technical levels were tested on the charts with the RUT (page 4) closing below its near term support level. The data has become more mixed with a combination of positive and negative signals for the near term. As a result, we remain “neutral” in our near term outlook for the major equity indexes while the forward P/E for the SPX keeps our intermediate term view at “neutral” as well.
· On the charts, the only index managing to close in the green yesterday was the DJT. The balance closed lower on higher volume with negative internals. The DJI tested its intermediate term downtrend line but failed to violate while the MID (page 4) tested support. The DJT (page 3) violated support on an intraday basis but managed to close above. The poorest action occurred on the RUT that violated its near term support level as noted on the chart. As such, the charts are continuing their series of lower highs but, with the exception of the RUT, managing to hold support.
· The data has become more mixed. Most of the McClellan OB/OS Oscillators remain neutral with the exception of the NASDAQ 1 day reading that is now oversold at -59.32. The WST Ratio/Composite (65.3/156.3) is bearish along with the OEX Put/Call Ratio (smart money) that shows the pros hopping the fence once again, this time to heavily weighted put exposure at 1.93 as they bet on more weakness. It is countered by the Equity Put/Call Ratio (contrary indicator) that also finds the crowd long puts at 0.73. The Gambill Insider Buy/Sell Ratio has improved with insider buying moving the scale up to 14.1 but still in neutral territory.
· In conclusion, even with the violation of support of the RUT, we are not convinced that the weight of the evidence has moved enough to alter our near term “neutral” view for the major equity indexes. The forward P/E for the SPX remaining near historically high levels keeps our intermediate term outlook also at “neutral”.
· Forward 12 month earnings estimates for the SPX from IBES of $128.91 leave a 6.01 forward earnings yield on a 16.6 forward multiple.
SPX: 2,120/2,171
DJI: 18,078/18,335
COMPQX; 5,223/5,327
DJT: 7,954/8,144
MID: 1,511/1,550
RUT: 1,200/1,235
VALUA: 4,812/4,968