Data Turns Neutral
Opinion: All of the indexes closed higher yesterday with broadly positive internals as volumes declined from the prior session although remaining above average. All closed at or near their intraday highs. While there were some chart improvements, none of the current near term resistance levels were violated and remain important technical barriers to progress. As well, the large portion of the data is now neutral versus its bullish implications from yesterday morning. As such, although yesterday’s action was positive, we remain near term “neutral”, largely due to our opinion that resistance levels need to be violated in order to become more optimistic.
- On the charts, all of the indexes closed higher with solid internals on good volume, although volume was lower than the prior session. The fact that all closed near their highs of the day was another positive. The SPX (page 2) and DJI (page 2) both managed to reclaim their 200 DMAs that had been violated during the prior session. We also now find all of the stochastic readings back in oversold territory. However, we need to see “bullish crossovers” for them to become “actionable”. Our major concern at this stage is whether or not the current resistance levels will be broken to the upside. We would also note the advance/decline lines for the All Exchange and NYSE remain in near term downtrends. While the futures indicate a good open, we continue to be of the opinion that resistance needs to be violated on a closing basis with good internals. That has yet to occur.
- The data that flashed bullish signals yesterday morning has now turned largely neutral, including all of the McClellan OB/OS Oscillators (All Exchange:-25.36/+7.0 NYSE:-20.4/+32.67 NASDAQ:-31.88/-21.78). The WST Ratio and its Composite are also neutral (52.4/127.5) along with the Equity Put/Call Ratio (contrary indicator) at 0.59 and OEX Put/Call Ratio (smart money) at 1.01.The Gambill Insider Buy/Sell Ratio has slipped to 17.4 but remains neutral as well.
- In conclusion, while yesterday’s move was a welcome respite and today’s futures indicate a positive open, we believe there is not quite enough evidence to support a shift from our near term “neutral” outlook. Violations of resistance with good internals on a closing basis may be required for that o take place.
- Forward 12 month earnings estimates for the SPX from IBES of $125.78 leave a 6.18% forward earnings yield on a 16.2 forward multiple.
SPX: 1,993/2,042
DJI: 17,070/17,518
COMPQX; 4,546/4,714
DJT: 7,048/7,533
MID: 1,407/1,452
RUT: 1,079/1,142
VALUA: 4,394/4,546