Data Stays Largely Neutral
Opinion: All of the indexes closed higher yesterday with positive internals as volumes declined slightly from the prior session. Early morning weakness was overcome with all closing at or near their intraday highs. No resistance levels were violated, however. All of the near term uptrends remain intact with the data staying mostly in neutral territory, thus leaving our near term outlook “neutral/positive”. Valuation remains near historically high levels causing our intermediate term outlook to remain “neutral”.
- On the charts, all of the indexes closed higher with positive internals and near their intraday highs. The SPX (page 2), MID (page 4) and VALUA (page 5) all closed on their respective resistance levels that may be violated today. The RUT (page 4) saw some improvement in closing above its 200 DMA as well as its long term downtrend line. The improvement in the RUT may be what is contributing to the positive trend in the advance/decline lines of the exchanges as all have now achieved higher highs.
- We would also note the silver chart as viewed via the SLV ETF (page 9). As strong buying volumes have appeared, the SLV chart has been toying with resistance the past few sessions that is indicated to be violated on the open this morning. The weakness in the U.S. Dollar discussed in these notes as having an inverse impact on commodity prices looks like it is being played out in general but notably in silver for the near term.
- The data remains largely neutral including all of the McClellan OB/OS Oscillators with the exception of the NYSE 21 day at an overbought +63.77. The “bear alert” signal from the WST Ratio and its Composite at 70.8 and 172.5 is being counterbalanced, in our opinion, by the OEX Put/Call Ratio (smart money) that shows the pros long calls at 0.63 and looking for strength.
- In conclusion, both the charts and data suggest the near term market prospects to be “neutral/positive”. However, with the forward p/e for the SPX at 16.9X forward 12 month estimates and near historic highs, we remain “neutral” for the intermediate term.
- Forward 12 month earnings estimates for the SPX from IBES of $123.58 leave a 5.9% forward earnings yield on a 16.9 forward multiple.
SPX: 2,061/2,094
DJI: 17,541/8,114
COMPQX; 4,836/5,001
DJT: 7,692/8,073
MID: 1,423/1,473
RUT: 1,093/1,146
VALUA: 4,437/4,624