Data Mixed
Opinion: All of the indexes closed lower yesterday with negative internals on the NYSE and mixed internals on the COMPQX. All closed at or near their intraday lows. However, no trends were violated nor were any bearish stochastic crossover signals generated. As such, the neutral/positive short term trends for the indexes remain intact while the data continues to cover a broad spectrum, remaining inconclusive. As such, we believe the near term outlook remains neutral/positive while valuation continues to be an intermediate term concern.
- On the charts, all of the indexes closed lower with mostly negative internals as volumes grew notably. However, there was no notable impact on the charts as all remain within their current trends. The SPX (page 2) and DJI (page 2) remain in their current sideways patterns while the COMPQX (page 3), MID (page 4) and RUT (page 4) are still in their short term uptrends. The MID closed on its uptrend line but did not violate. The DJT (page 3) was the weakest of the group and tested its 50 DMA but remains in its intermediate term ascending triangle pattern of higher lows with a flat top. So, nothing has changed in terms of trend. The bulk of the indexes are overbought on their stochastic readings but have not seen bearish crossover signals triggered at this point.
- The data is covering a broad measure of signals, so many that the net result is inconclusive. The NASDAQ 1 day McClellan OB/OS is very mildly overbought at +50.5 with the rest of the OB/OS levels in neutral. The Gambill Insider Buy/Sell Ratio has moved back to a neutral 18.7 while the OEX Put/Call Ratio (smart money) has flipped to a mildly bullish 0.84 from its prior bearish reading. With the balance of the indicators primarily neutral, no strong directional implications can be gleaned at this point in time.
- In conclusion, the short term trends remain intact for the indexes and, in our opinion, should be respected until violations occur or the stochastic readings turn negative. For the intermediate term, our concern remains that of valuation with the forward multiple for the SPX near its decade peak at 16.5X.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 6.05% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $125.84 versus the 10 Year Treasury yield of 2.22%.
SPX: 2,044/2,102
DJI: 17,468/17,903
COMPQX; 4,978/5,130
DJT: 7,895/8,330
MID: 1,444/1,486
RUT: 1,145/1,202