Short Term Outlook Remains “Neutral/Positive”
Opinion: All of the indexes closed lower Friday with mixed internals on the NYSE and negative internals on the NASDAQ. Volumes declined from the prior session on both exchanges while most of the indexes managed to close near their intraday highs. No support levels were violated on the charts although some short term uptrends were broken. The data is almost entirely neutral. Thus, we still maintain our near term “neutral/positive” near term and intermediate term outlook. However, as noted previously, valuation is extended.
- On the charts, all of the indexes closed lower Friday. However, most closed near their intraday highs. Volumes declined from the prior session as internals were generally negative. No support levels were violated. Yet there are a few technical events worth noting. The DJT (page 3) gave a “bearish stochastic crossover” signal and remains below its 50 DMA but still in its short term uptrend. The COMPQX (page 3) and RUT (page 4) both closed below their short term uptrend lines. Said uptrend violations are not necessarily bearish. They could be just entering a sideways consolidation phase. We will observe them closely for any further developments. So the charts, even with the issues stated above, remain largely positive.
- The pullback on Friday shifted all of the McClellan 1 day OB/OS Oscillators back into neutral territory (All Exchange:+43.26 NYSE:+45.39 NASDAQ:+44.93). Only the NYSE 21 day is overbought at +66.59. The Equity and OEX Put/Call Ratios are neutral as well at 0.59 and 1.21 respectively while the WST Ratio and its Composite are also neutral at 54.7 and 132.6. The Gambill Insider Buy/Sell Ratio is also neutral with a 13.1 reading. As such, the data is yielding no near term directional implications at this point.
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- In conclusion, Friday’s dip in the indexes was not enough to alter our near term “neutral/positive” outlook. For the intermediate term, we remain “neutral/positive” as well given good market breadth. Yet valuation is near historic highs suggesting limited upside in that regard.
- Forward 12 month earnings estimates for the SPX from IBES of $124.48 leave a 5.93% forward earnings yield on a 16.9 forward multiple.
SPX: 2,072/2,116
DJI: 17,527/17,922
COMPQX; 4,820/4,972
DJT: 7,476/7,823
MID: 1,453/1,513
RUT: 1,133/1,169
VALUA: 4,591/4,722