Short Term Outlook Remains “Neutral/Positive”
Opinion: The indexes closed mostly lower yesterday with negative internals on the NYSE while NASDAQ internals were positive. Volumes rose on both exchanges form the prior session but remained lackluster. The charts find the indexes continuing their mostly tight, sideways patterns that have persisted for the month of August, with one minor positive signal being generated yesterday. The data scales remain largely neutral and evenly balanced, thus continuing their nondirective near term message that has existed for the past several sessions. As such, our near term outlook continues to be “neutral/positive” while high SPX valuation keeps our intermediate view at “neutral”.
Yesterday saw another relatively uneventful day on the charts. Most of the indexes closed slightly lower while the DJT (page 3) and RUT (page 4) posted minor gains. NYSE internals were negative while NASDAQ internals were positive, both on higher but still dull trading volumes. The advance/decline lines remain positive with the exception of the % of SPX stocks trading above their 50 DMAs as noted in our comments of last week noting a lower low. One positive signal came from the DJI (page 2) that flashed a “bullish stochastic crossover”. However, we would need to see a violation of resistance for validation. As such, the charts remain mostly in their sideways patterns that have been intact for the month of August with the exceptions of the DJI, MID (page 4) and RUT that are in minor uptrends.
The data continues to send its neutral message as well. All of the McClellan OB/OS Oscillators remain neutral (All Exchange:-14.57/+28.66 NYSE:-23.95/+35.46 NASDAQ:-2.25/+24.78) along with the WST Ratio/Composite (54.9/135.2), Equity Put/Call Ratio (0.63) and Gambill Insider Buy/sell Ratio (13.0). The Total (contrary indicator) and OEX (smart money) are counterbalancing with a bullish 0.97 and bearish 1.86 respectively. So the data continues to send its “broken record” neutral message as seen over the past several sessions.
In conclusion, we have yet to see enough of a shift, in either direction, of the weight of the evidence to alter our near term “neutral/positive” outlook for the major equity indexes while historically high SPX valuation keeps our intermediate term view at “neutral”.
Forward 12 month earnings estimates for the SPX from IBES of $127.22 leave a 5.85% forward earnings yield on a 17.1 forward multiple.
SPX: 2,160/2,194
DJI: 18,374/18,637
COMPQX: 5,160/NA
DJT: 7,795/7,974
MID: 1,534/NA
RUT: 1,221/1,266
VALUA: 4,904/NA