Data Mildly Positive
Opinion
Friday’s action left the bulk of the major equity indexes higher on the day with some minor chart improvements on generally positive internals. Given the current state of the charts and some mildly positive data, we are of the opinion that some upside yet remains for the major indexes over the short term.
- On the charts, although volumes dropped from the prior session, they remained well above average with mostly positive internals. Only the NASDAQ A/D was slightly negative. The chart improvements came in the form of both the DJI (page 2) and DJT (page3) closing above their respective short term resistance levels. However, their intermediate term downtrends remain intact. The MID (page 4) closed fractionally above its short term downtrend line but remains below resistance while the RUT (page 4) rallied to resistance but failed to close slightly lower on the day. As well, all of the indexes are now on bullish stochastic crossover signals above the 20 signal line adding a slightly positive tone. As such, we are of the opinion that the charts have seen some slight technical improvement.
- Looking at the data, the 1 day McClellan OB/OS Oscillators are neutral for the NYSE (+15.15) and NASDAQ (+11.8) while both of their 21 day levels remain oversold at -76.72 and -85.08 respectively. The Total and Equity Put/Call Ratios (contrary indicators) show the “crowd” remains fearful at 1.2 and .71 while the WST Ratio and its Composite are neutral at 60.1 and 140.2. The only outlier is the high OEX Put/Call Ratio (smart money) of 1.92 showing the pros very heavy in puts and expecting weakness. So aside from the OEX, the data is mildly positive, in our view.
- In conclusion, although a lot remains to be desired regarding the more intermediate trend, we are of the opinion that the charts and data are suggesting a bit more upside remains for the indexes over the short term.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 6.84% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $129.05 versus the 10 Year Treasury yield of 2.2%.
- S&P 500: 1,826/1,906
- Dow 30: 15,874/16,464
- NASDAQ: 4,145/4,465
- DJT: 7,695/8,171
- MID: 1,267/1,340
- Russell 2000: 1,075/1,099