Data Slightly Negative
Opinion: The indexes closed mixed yesterday resulting in very little price change. Internals were slightly negative as volumes declined from the prior session. We remain neutral in our short term outlook as both the charts and data are, in our opinion, suggesting some consolidation of the gains post the January 20 lows as the higher probability. And while the A/D lines for the indexes have improved as the recent rally progressed, we remain of the opinion that there is not enough evidence at this stage to alter our concerns for the more intermediate term.
- On the charts, the indexes took a breather yesterday as they closed mixed with little alteration in price. And although no important technical events were registered, we now see some indications to further bolster our near term neutral outlook as some consolidation may now be likely. We had been expecting some tests of resistance as a result of the recent rally and some were achieved yesterday with the SPX (page 2), COMPQX (page 3), MID (page 4) and VALUA (page 5) all testing respective resistance levels. The DJT (page 4) tested its intermediate downtrend line that has been in place since the beginning of December. As well, the stochastic levels for the SPX, MID and VALUA are now in overbought territory as the rest approach theirs. While no bearish crossovers have been triggered, the prior oversold conditions no longer exist.
- On the data, the 1 day McClellan OB/OS Oscillators remain overbought (VALUA:+66.15 NYSE:+79.42 NASDAQ:+51.64) while the WST Composite is a bearish 151.6. As well, the OEX Put/Call Ratio finds the pros long puts at 1.49. As such, there is a slightly negative tone to the data corroborating what appears to be the message from the charts. One bright spot is the Gambill Insider Buy/Sell Ratio still showing insiders to be very active buyers at 54.8, tempering, in our opinion, the risk of a significant decline.
- In conclusion, we find both the charts and data suggestive of some near term sideways consolidation of the recent market gains while, although seeing some improvement, our intermediate term outlook remains cautious.
- Forward 12 month earnings estimates for the SPX from IBES of $124.43 result in a 6.42% forward earnings yield with a 15.6 forward multiple.
SPX: 1,875/1,949
DJI: 15,975/16,592
COMPQX; 4,418/4,644
DJT: 6,580/7,022
MID: 1,230/1,315
RUT: 982/1,052
VALUA: 3,888/4,070