Data Remains Mixed
Opinion
Our next report will be Monday, July 9. Most of the indexes closed higher yesterday with the exception of the DJT posting a loss. In spite of the gains, no technical events of import were generated on the charts. The data remains mixed and uninstructive regarding any high probability near term projections for the equity markets. As such, our discipline requires we maintain our short term “neutral/negative” outlook for the major indexes in place until enough evidence is presented to warrant a change.
- On the charts, the only index to close lower yesterday was the DJT (page 4) as the rest garnered gains. Internals were positive of the NYSE and NASDAQ as volumes declined on both exchanges from the prior session. All closed near their intraday trading highs. However, no resistance levels or trend lines were violated on the charts, leaving the near term trends neutral on the RTY (page 5) and VALUA (page 5) with the rest negative. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain negative but above their 50 DMAs. Two minor improvements were seen as the MID (page 4) managed to close back above its 50 DMA while the DJT saw what we believe to be a “hammer” registered on its chart. The “hammer” theoretically implies a near term washout of selling pressure that may result in a reflex rally. We would also note all of the stochastic levels are oversold. Yet they have not shifted to bullish crossover signals at this point that would suggest some degree of relief available.
- The data remains mixed. The All Exchange and NASDAQ 21 day McClellan OB/OS Oscillators are oversold but the rest remain neutral (All Exchange:+6.9/-57.14 NYSE:+20.5/-46.58 NASDAQ:-2.43/-70.1). We usually see oversold conditions on the 1 day levels coincident with correction lows. The OpenInsider Buy/Sell Ratio has improved to 52.7 but remains neutral as is the Equity Put/Call Ratio at 0.65. The Total P/C (contrary indicator and OEX P/C are bullish at 1.32 and 0.62 respectively but the Rydex Ratio (contrary indicator) still finds the leveraged ETF traders very leveraged long at 1.62. Valuation finds the SPX based on the forward 12 month consensus earnings estimates from Bloomberg of $163.57 at a 16.6 multiple versus the “rule of 20” implied fair value of 17.2.
- In conclusion, yesterday’s strength was not sufficient to alter the weight of the chart and data evidence to shift our current 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