Short Term Outlook Remains “Neutral/Positive”
Opinion: All of the indexes closed higher yesterday with positive internals. However, trading volumes slipped to very dull levels. The charts remain, for the most part, in their sideways patterns that have persisted for the month of August. One minor chart event took place yesterday while the data continues to show neutral readings, almost exclusively. As such, we have yet to see a reason to alter our near term “neutral/positive” view for the major equity indexes. High SPX valuation causes our intermediate term outlook to remain “neutral”.
· On the charts, all of the indexes closed higher yesterday with good internals but on fairly anemic volume, continuing the mostly sideways moves that have persisted for the month of August. Only the MID (page 4) and RUT (page 4) have shown a slightly upward bias. The only chart event yesterday worth mentioning was the SPX (page 2) closing back above its short term uptrend line that had been violated in the prior session. No support or resistance levels were violated.
· The data remains almost entirely neutral, thus continuing to lack evidence for an alteration of the current neutral market bias. All of the McClellan OB/OS Oscillators are neutral (All Exchange:-11.33/+25.86 NYSE:-17.54/+30.98 NASDAQ:-3.46/+22.6). The WST Ratio/Composite is neutral as well at 54.9/135.2 along with the Equity and OEX Put/Call Ratios at 0.6 and 1.2, respectively. The Gambill Insider Buy/Sell Ratio remains stuck at a neutral 15.3. There is nothing here suggestive of a near term shift in bias, either up or down.
· In conclusion, while the MID and RUT have seen some minor technical lift, the rest of the index charts combined with the data continue, in our opinion, to send their “neutral/positive” near term projections. Extended SPX valuation keeps us “neutral” for the intermediate term.
· Forward 12 month earnings estimates for the SPX from IBES of $127.22 leave a 5.83% 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