McClellan OB/OS Oscillators Neutral
Opinion: As a result of yesterday’s action, both the short term outlook and data remain neutral. While most of the indexes advanced, volumes declined notably on the NYSE while the NASDAQ rose with negative breadth, thus detracting from the validity of the gains. With sentiment data remaining cautionary as forward earnings estimates decline for the SPX, we remain cautious regarding the intermediate term.
- On the charts most of the indexes advanced yesterday with the exception of the RUT (page 4). No resistance levels or downtrend lines were violated. As noted, NYSE volumes declined sharply while the NASDAQ advance came with negative breadth. As such, we view the gains as somewhat suspect. So, we see no technical reasons rom the charts to alter our near term neutral outlook for the indexes.
- The data remains largely neutral as well, including the McClellan OB/OS Oscillators (NYSE:+0.71/+19.7 NASDAQ:-45.82/-31.34). The OEX Put/Call Ratio and Equity Put/Call Ratio are also neutral. Only the Total Put/Call Ratio (contrary indicator) is sending a bullish signal at 1.07. The Gambill Insider Buy/Sell still shows insiders largely devoid of buying interest at 9.5 while the new Investors Intelligence Bear/Bull Ratio (contrary indicator) continues to show advisors as overly bullish and unfazed by last week’s decline at 17.4/49.0.
- In conclusion, we view both the data and charts as suggesting the near term prospects for the indexes as neutral while the shaving of forward 12 month earnings estimates for the SPX combined with investor sentiment leaves us concerned for the more intermediate term.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 6.13% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $124.62 versus the 10 Year Treasury yield of 1.85%.
SPX:1/977/2,039
DJI:17,265/17,733
COMPX:4,544/4,686
DJT:8,656/8,995
MID:1,401/1,440
RUT:1,155/1,199