DJT Closes Back Below 50 DMA
Opinion
The indexes closed mixed yesterday with positive internals on the NYSE and NASDAQ as volumes declined on both exchanges. No major technical events of import were generated on the charts while the data has returned to a mixed bag of indicators. As such, we have yet to see enough of a shift in any of the evidence to alter our near term “neutral/negative” outlook for the major equity indexes.
- On the charts, the indexes gave mixed results yesterday with the DJT (page 3) and RTY closing lower on the day as the rest saw modest advances. The DJT closed back below its 50 DMA, joining the RTY in that regard. While internals were positive, volumes declined and have been relatively weak on recent advances. Short term trends for the indexes are neutral while the advance/decline lines remain negative across the board as the NYSE A/D is the only one above its 50 DMA.
- The data is mixed as are the McClellan OB/OS Oscillators. The All Exchange and NYSE 1 day OB/OS remain oversold at -62.18 and -66.95 while the NASDAQ 1 day has turned neutral at -30.66. All of the 21 day levels are neutral. We would note that last Thursday morning, the NYSE 1 day level was extremely oversold at -133.02, a level that usually would precede a healthy market bounce. However, in this case, the DJI managed less than a 20 point gain before cutting the oversold condition in half. If the indexes cannot lift notably from said oversold levels, it would add another cause for concern, in our opinion. The Total and Equity Put/Call Ratios (contrary indicators) are bullish as the crowd has been buying puts at 0.94 and 0.7. On the other hand, the pros are extremely weighted in puts with a 3.38 OEX Put/Call Ratio as they are betting heavily on some near term weakness unfolding.
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- In conclusion, we are maintaining our near term “neutral/negative” outlook for the equity indexes as breadth and volumes are declining in the face of a 17.8 forward multiple, near over a decade high, for the SPX based on 12 month forward IBES estimates for the SPX. We believe current reward generally does not warrant the risk entailed.