DJT Performance Continues To Lag
Opinion: All of the indexes closed higher yesterday with positive breadth and up/down volume while overall volumes rose but not to the degree one might suspect given the size of the gains. No resistance levels were violated while the DJT continued to lag in its relative performance. The data scales are fairly evenly balanced yielding no short term directional implications. As such, in spite of yesterday’s gains, we remain cautious for both the near and intermediate term for the major indexes.
- On the charts, while all of the indexes advanced yesterday, the SPX (page 2) managed to close above its 50 DMA but was unable to violate its near term resistance level after an intraday test. The DJI (page 2) also rose above its 50 DMA but closed at resistance which technically remains intact. We would note the lackluster performance in the DJT (page 4) in yesterday’s action as we continue to view it as the leading index for the markets as a whole. It remains well below its 50 DMA after testing its 200 DMA last Thursday. Should the DJT continue its prescient action, it would suggest yesterday’s market gains to resistance may be short lived.
- The data is fairly evenly split with all of the McClellan OB/OS Oscillators at neutral (NYSE+17.19/+6.86 NASDAQ:+8.87/+0.29). The Total and Equity Put/Call Ratios (contrary indicators) are cancelling each other out at .78 and .53 respectively while the OEX Put/Call Ratio (smart money) is a bullish 0.78. Meanwhile, the Rydex Ratio (contrary indicator) still shows the leveraged ETF traders overly bullish at 66.9 while the Gambill Insider Buy/Sell Ratio at a neutral 10.2 is close to a bearish signal. So in aggregate, the data is too diverse at this point to give a strong near term directional implication.
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- With the forward 12 month p/e for the SPX near a decade high at 16.9 based on First Call’s forward 12 month estimates, we continue to be concerned about valuation and its level of risk for the intermediate term.
- In conclusion, we have yet to see technical activity that would suggest altering our current near term caution for the major equity indexes while valuation remains a concern for the intermediate term.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 5.91% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $123.22 versus the 10 Year Treasury yield of 1.96%.
SPX: 2,050/2,088
DJI: 17,642/17,970
COMPQX: 4,848/4,956
DJT: 8,647/9,002
MID: 1,496/???
RUT: 1,236/1,262