Near-Term Outlook Remains “Neutral/Positive”
Opinion
All of the indexes closed lower yesterday with negative internals as volumes rose from the prior session but remained subdued. Most closed at or near their intraday lows. Some short term uptrend lines were violated on the charts, sending minor cautionary signals. However, no support levels were violated. The vast majority of the data remains neutral. The trend line violations were not sufficient, in our opinion, to alter our near term “neutral/positive” outlook for the indexes. However, extended valuation keeps us “neutral” for the more intermediate term.
- All of the indexes closed lower yesterday with negative internals on slightly higher trading volumes. The MID (page 4), RUT (page 4) and VALUA (page 5) closed below their respective short term uptrend lines. These signals are not necessarily outright bearish as they frequently precede periods of sideways consolidation. It would likely require a violation of support levels to raise a more meaningful yellow flag. At this point, all of the near term support levels remain intact.
- The data remains almost entirely neutral, including all of the McClellan OB/OS Oscillators (All Exchange: -26.45/+23.92 NYSE:-37.12/+29.46 NASDAQ:-18.42/+17.7). The WST Ratio and its Composite are neutral at 54.3 and 133.8 along with the Gambill Insider Buy/Sell Ratio at 13.0 and the OEX Put/Call Ratio (smart money) at 1.25. The crowd became a bit more nervous as seen by their put buying on the Total and Equity Put/Call Ratios (contrary indicators) at 1.03 and 0.7 respectively, sending a mildly bullish signal. So the data continues to be fairly evenly balanced at this time, in our opinion.
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- In conclusion, in spite of the near term uptrend line violations yesterday, we remain of the opinion that the weight of the evidence continues to imply a “neutral/positive” outlook for the major indexes over the near term. The historically high 17.1 forward 12-month multiple for the SPX keeps our intermediate term view “neutral”.