Data Still Suggests PauseOpinion
The indexes closed mostly higher yesterday with the exceptions of the DJT and MID. Internals were positive on the NYSE and NASDAQ as volumes rose from the prior session. While some new closing highs we achieved on the charts, gains were marginal in magnitude. The data remains mixed but the OB/OS Oscillators continue to suggest a potential pause/retracement of the recent rally. The positive short term trends should still be respected although valuation is once again stretched to over a decade high.
- On the charts, only the MID (page 4) and DJT (page 3) closed lower yesterday. The rest advanced but gains were marginal. Internals were positive and all of the near term uptrends remain intact. The SPX (page 2), DJI (page 2) and COMPQX (page 3) all made marginally new closing highs while the VALUA (page 5) closed above near term resistance. We would note all of the stochastic levels are well into overbought territory but have not become actionable as bearish crossovers have yet to appear.
- The data, in our opinion, while mixed implies some potential for a pause/retracement of the recent rally as all of the McClellan OB/OS Oscillators are overbought with the one exception of the neutral NASDAQ 21 day reading (All Exchange:+60.37/+59.88 NYSE:+65.07/+57.63 NASDAQ:+58.0/+38.1). All of the put/call ratios are neutral (Total:0.81 Equity:0.58 OEX:1.26) as is the Open Insider Buy/Sell Ratio at 43.5. Valuation is extended as the forward SPX p/e based on forward 12 month earnings estimates is back to over a decade high at 18.2.
- In conclusion, while we remain of the opinion that the near term chart uptrends should be respected until proven otherwise; the OB/OS Oscillators, stochastic levels and valuation are suggesting some pause/retracement of the recent rally gains.