Indexes Bounce On Lighter Volume
Opinion: All of the indexes closed higher yesterday with positive internals. However, volumes declined notably from the high volume distribution seen near the end of last week. No technical events of import were registered, leaving the warning signals of the prior two sessions intact. The data remains a mixed bag with no strong directional implications at this time. As such, we remain “neutral/negative” in our short term outlook while elevated valuation keeps us “neutral” for the more intermediate term timeframe.
- On the charts, all of the indexes closed higher yesterday with positive internals but volumes declined from the prior two sessions that saw institutional distribution. We see the decline in volume as a lessening of bullish conviction by market participants. No technical events of note took place. The DJI (page 2), COMPQX (page 3) and DJT (page 3) all remain below their intermediate term uptrend lines violated last week while the COMPQX remain below its 200 DMA. The U.S. Dollar as measured by the UUP ETF continued lower after breaking critical long term support discussed in yesterday’s comments.
- The data is a mixed bag and, in our opinion, not strongly suggestive of near term market directional probabilities. All of the McClellan OB/OS Oscillators remain neutral with the exception of the NYSE 21 day at an overbought +72.87. The Total and Equity Put/Call Ratios (contrary indicators) show the crowd still long puts at 1.16 and 0.86 while the OEX Put/Call Ratio (smart money) still finds the pros long calls at 0.74 and looking for a bounce. The WST Ratio and it Composite are both bearish at 75.9 and 172.3 respectively. So as can be seen, the data is all over the map and lacking in directional implications.
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- As such, with the chart warnings still in place and no strong implications from the data, we remain “neutral/negative” for our short term outlook.
- For the intermediate term, we remain “neutral” as the forward 12 month p/e based on IBES forward 12 month earnings estimates for the SPX leaves a market multiple near the level seen prior to the January correction.
- Forward 12 month earnings estimates for the SPX from IBES of $123.42 leave a 5.93% forward earnings yield on a 16.9 forward multiple.
SPX: 2,044/2,091
DJI: 17,700/18,112
COMPQX; 4,773/4,915
DJT: 7,747/8,088
MID: 1,451/1,491
RUT: 1,107/1,162
VALUA: 4,550/4,741