Data Remains Mixed
Opinion
All of the indexes closed lower Wednesday with negative internals on the NYSE and NASDAQ as volumes increased on both exchanges from the previous session. More violations of support and trend were registered on the charts while the data remains mixed and shy of strongly suggesting a meaningful bounce is at hand. Thus we are maintaining our near term “neutral/negative” outlook for the major equity indexes.
- On the charts, all of the indexes closed lower yesterday and at or near their intraday lows with negative internals on higher trading volume. More chart deterioration was registered as the SPX (page 2) closed below its 50 DMA and on support. The DJI (page 2) closed blow its long term uptrend line while the DJT (page 4) broke below another support level as well as its long term uptrend line and 200 DMA. The MID (page 4) also closed below near term support, turning its short term trend negative from neutral, while also closing below its 50 DMA. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ ae all negative but remain above their 50 DMAs. So we now find the RTY (page 5) and VALUA (page 5) in neutral near term trends with the rest negative.
- The data, in our opinion, has not yet reached levels suggesting weakness has a high probability of having been completed. While all of the 21 day McClellan OB/OS Oscillators are oversold, the 1 day readings remain neutral (All Exchange;+16.8/-75.02 NYSE:+33.06/-66.73 NASDAQ:+5.33/-87.6). In our experience, it is usually deeply oversold 1 day readings that are coincident with correction lows. The Equity Put/Call Ratio (0.67) and OpenInsider Buy/Sell Ratio (49.0) remain neutral while the OEX P/C finds the pros have flipped again to a very bearish 2.08 versus their long call positions yesterday morning. The Rydex Ratio (contrary indicator) still finds the leveraged ETF traders near extreme leveraged long levels at 1.7. As such, the data is too mixed to offer any strong near term implications. Valuation finds the SPX based on the forward 12-month consensus earnings estimates from Bloomberg of $163.57 at a 16.5 multiple versus the “rule of 20” implied fair value of 17.1.
- In conclusion, while some of our concerns regarding the level of chart extensions have moderated to some degree, the overall state of the charts and data suggest we maintain our near term “neutral/negative” outlook for the major equity indexes.
- SPX: 2,700/2,779
- DJI: 24,084/24,700
- NASDAQ: 7,426/7,679
- NDX: 6,955/7,191
- DJT: 10,180/10,771
- MID: 1,929/1,984
- Russell: 1,628/1,685
- VALUA: 6,291/6,398