Short-Term Trends Unchanged
Opinion
The indexes closed mixed yesterday with mildly positive internals on the NYSE and NASDAQ as volumes dropped on the NYSE while NASDAQ volumes were flat versus the prior session. Other than the DJI making a new closing high no other technical events of import were generated on the charts while the data remains largely neutral. As such the current near term trends should be respected with the caveat that extended valuation, high levels of margin debt and investment advisor complacency are waving yellow flags implying risk is high versus potential reward.
- On the charts, the indexes closed mixed with the DJT (page 3) and RTY Page 4) closing lower on the session while the rest posted modest gains. Other than the DJI (page 2) making a new closing high, no other technical events of import were generated, leaving the DJI and DJT in positive short term uptrends with the rest of the indexes in neutral, sideways, patterns. All closed near their intraday highs. In spite of our concerns stated repeatedly in prior comments, current trends should be respected until proven otherwise.
- The data remains largely neutral. All of the McClellan OB/OS Oscillators are neutral (All Exchange:+18.33/+14.63 NYSE:+18.46/+26.69 NASDAQ:+19.06/+4.37) as are the Equity Put/Call Ratio (0.62) and Open Insider Buy/Sell Ratio (43.2). The Total and OEX Put/Call Ratios are on bullish signals at 0.87 and 0.47 respectively but their effectiveness of accurately predicting near term market moves has lessened notably over the past few months.
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- In conclusion, the chart trends appear to rule in spite of our concerns regarding the following. The new Investors Intelligence Bear/Bull Ratio still shows investment advisors quite complacent at 18.8/52.5 while the use of margin is up 19.7% y/y. Forward valuation of the SPX is at an 18.3 multiple, at a 15-year market peak, while the U.S. stock market total valuation is now 1.3 times U.S. GDP (only seen in late 1999 and early 2007).