Multiple Chart Improvements Registered
Opinion: All of the indexes closed higher yesterday with positive breadth as volumes rose from the prior session. All closed at or near their highs of the day. Multiple positive chart events were registered and detailed below, offering further encouragement for the short term outlook. While the data has turned mixed, there are few points of concern on the dashboard for the near term at this point, although many have moderated. For the intermediate term we remain cautious as, in spite of some improvements in breadth, all of the A/D lines remain in downtrends.
- On the charts all of the indexes closed at or near their highs of the day as internals were strong while volumes rose. Several positive events were registered on the charts starting with the DJT (page 3) closing above its 50 DMA. It was the only index able to see that achievement. And as we still regard it as the leading index for the rest of the indexes, it offers encouragement. The SPX (page 2), RUT (page 4) and VALUA (page 5) all closed above resistance as well as their short term downtrend lines. The DJI (page 2), COMPQX (page 3) and MID (page 4) all closed above their short term downtrend lines as well. However, they closed at their resistance levels that have a high probability of being broken on the open this morning. The vast majority of the stochastic levels remain mid-range and not flashing cautionary signals at this point.
- The data is turning more mixed. All of the McClellan OB/OS Oscillators remain neutral with the exception of the NASDAQ 1 day that slipped slightly into overbought territory at +51.06. The OEX Put/Call Ratio (smart money) at 1.82 now shows the pros quite heavy in puts and expecting weakness that is being counterbalanced by the Total and Equity Put/Call Ratios (contrary indicators) with the crowd long puts at .95 and .80. The Gambill Insider Buy/Sell Ratio remains very bullish as insiders remain very active buyers at 67.0. So although a couple of data points are turning cautionary, the scales still seem to be fairly evenly matched, in our opinion.
- In conclusion, both the charts and data are suggesting a bit more upside is left for the indexes over the short term while breadth has yet to improve to a point that would alter our intermediate term caution.
- Forward 12 month earnings estimates for the SPX from IBES have been reduced from $123.91 to $123.27 leaving a 6.5% forward earnings yield with a 15.4 forward multiple.
SPX: 1,813/1,9.03
DJI: 15,975/16,177
COMPQX; 4,211/4,434
DJT: 6,790/7,022
MID: 1,216/1,290
RUT: 923/998
VALUA: 3,713/4,074