All McClellan OB/OS Oscillators Overbought
Opinion: All of the indexes closed higher yesterday with positive internals as volumes rose on the NYSE but declined on the NASDAQ from their prior sessions. All closed at or near their intraday highs with some violating resistance on the close. All short term uptrends remain intact while the data is starting to moderate as it is now turning less positive from its prior implications. The net result is we remain “neutral/positive” for both the near and intermediate term outlooks. However, valuation remains stretched and continues to be the proverbial “fly in the ointment”.
- On the charts, all of the indexes closed higher yesterday with positive internals. While the DJI (page 2) and MID (page 4) closed on their resistance levels, the COMPQX (page 3), RUT (page 4) and VALUA (page 5) all closed above their respective resistance levels. The DJT (page 3) is the only index below its 50 DMA and on a bearish stochastic crossover signal. However, it and the rest of the indexes remain in their near term uptrends. We would also note the advance/decline lines for the exchanges remain positive and have now made higher highs as market breadth continues to improve.
- The data, however, is turning less positive. All of the McClellan OB/OS Oscillators are now overbought (All Exchange:+63.1/+64.7 NYSE:+61.95/+79.99 NASDAQ:+68.03/+52.72). Also, the OEX Put/Call Ratio (smart money) now finds the pros very heavily weighted in puts at 3.55 with a very heavy bet on expectations of near term weakness. Both the Total and Equity Put/Call Ratios (contrary indicators) are now neutral at 0.74 and 0.59 along with the WST Composite oat 147.6. Some comfort comes from the Gambill Insider Buy/Sell Ratio remaining a neutral 13.1 as insiders are yet to be found eagerly looking for the exit. So although the data is not dire in nature, it is less constructive than it has been over the past few weeks.
- In conclusion, in spite of the tempering of the data, we remain near term “neutral/positive” as well as for the intermediate term due, in that case, to continuing improvement in market breadth. However, high valuation is becoming more of a concern for us.
- Forward 12 month earnings estimates for the SPX from IBES of $124.48 leave a 5.9% forward earnings yield on a 16.9 forward multiple.
SPX: 2,072/2,116
DJI: 17,527/17,922
COMPQX; 4,861/5,003
DJT: 7,476/7,823
MID: 1,453/1,513
RUT: 1,133/1,201
VALUA: 4,636/4,792