NYSE 1 Day McClellan OB/OS Remains Overbought
Opinion: The indexes closed mostly lower yesterday taking a pause from the prior rally. Internals were positive on the NYSE as volumes declined while they were negative on the NASDAQ as volumes increased. No major technical events took place while the data is a mixed bag of positive and negative levels. As such, we continue to be of the opinion that the near term will likely be neutral in nature as further work may need to be done before new breaks of resistance can be achieved. The intermediate is neutral as well as the NASDAQ A/D remains in a downtrend and yet to reverse and follow in the footsteps of the NYSE.
- On the charts, the DJI (page 2) was the only index managing to close up yesterday as it moved fractionally above its 50 DMA. The rest of the index charts (pages 2-4) closed lower with negative internals on the NASDAQ. Both the DJI and COMPQX have now completed a 50% Fibonacci retracement of the slide from the mid-July highs. The SPX and DJI are now a bit overbought on their stochastic levels. None of these events were critical in nature and leave us feeling more work needs to be done technically, over the short term, prior to further progress being made.
- The data is a mixed bag. The NYSE 1 day McClellan OB/OS Oscillator remains overbought at +85.23 with the rest in neutral territory. Insiders remain buyers as noted by the Gambill Insider Buy/Sell Ratio at 26.3 while the Rydex Ratio (contrary indicator) shows the leveraged ETF traders continue to shrink their bullish attitudes to a neutral 28.2. The OEX Put/Call Ratio (smart money) is, however, sending a cautionary signal as the pros are now quite heavy in puts and looking for some near term weakness at 3.21. As such, the split data yields no strong directional implications at this time.
- We would note that First Call has raised its forward 12 month earnings estimates for the SPX form $126.11 to $126.83. Yet given the current setup of the charts and data, we suspect some further sideways action may be required over the near term while the NASDAQ A/D leaves us neutral for the intermediate term as well.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 6.41% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $126.83 versus the 10 Year Treasury yield of 2.04%.
SPX: 1.930/1,989
DJI: 16,302/16,925
COMPQX; 4,552/4,783
DJT: 7,665/8,058
MID: 1,350/1,426
RUT: 1,083/1,148