Indexes Close Mixed
Opinion
The indexes closed mixed yesterday with negative internals on the NYSE while NASDAQ internals were mixed. Several new closing highs were achieved on the charts, leaving most of the short term uptrend lines intact. However, there continue to be some issues of concern for us that suggest some degree of rational caution may be appropriate. Aside from extended valuation discussed yesterday, three more issues have appeared post yesterday’s comments suggesting investors may need to be treading a bit more lightly.
- On the charts, the indexes closed mixed with negative internals on the NYSE. The NASDAQ advance/decline was negative but up/down volume positive. The DJT (page 4) and RTY (page 5) closed lower as the rest advanced leaving the SPX (page 2), DJI (page 2) COMPQX (page 3) and NDX (Page 3) at new closing highs. As such, most of the near term uptrends remain intact with the exceptions of the DJT and MID (page 4) now in neutral trends. The NYSE and All Exchange cumulative A/Ds are positive with the NASDAQ cumulative A/D now neutral.
- Three issues on the data can now be added to those discussed yesterday. The OEX Put/Call Ratio is a very bearish 2.34 as the pros are heavy in puts. While this particular indicator has lost a good part of its prescience, it may be of some import. We now find the Investors Intelligence Bear/Bull Ratio (contrary indicator) in bearish territory as advisors don their party hats at 15.1/60.4, showing little if any concern for the market’s extended move. As well, we now find the % of SPX components above their 50 DMAs at 73.1%. While one may think that to be a positive, it is, in fact, at a level that has been a peak for that data point over the past 2 years. The implication is that the numbers of SPX components have a reasonable probability of declining below their 50 DMAs going forward, obviously not a positive.
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- Finally, as discussed yesterday, the forward 12-month p/e for the SPX is at a 15 year high of an 18.7 forward multiple of recently reduced estimates from $137.37 to $136.79 at BNloomberg. By that measure, stocks are not cheap and may have already figured in a strong earnings season. Should earnings disappoint, there may be some pain involved. It suggests some caution may now be appropriate.