More Resistance Levels Violated

Data Remains Mixed

Opinion

Most of the indexes closed higher yesterday with the one exception of the COMPQX. Internals were positive on the NYSE and NASDAQ as volumes rose from the prior session on both exchanges. Multiple resistance levels were violated on the charts with some new closing highs being achieved, leaving all of the near term uptrends intact. The data is mixed and not sending a particularly strong signal in either direction for near term market tendencies. So while the forward p/e for the SPX is at a 15 year high at an 18.3 multiple on 12 month forward earnings estimates that remains a concern, the chart near term trends should continue to be respected until proven otherwise, in our opinion.

• On the charts, the only index closing lower yesterday was the COMPQX (page 3) as market internals were positive. The SPX (page 2) and DJI (page 2) made new marginally closing highs while the DJT (page 3), MID (page 4) and VALUA (page 5) closed above their respective near term resistance levels. The cumulative advance/decline lines remain positive and above their 50 DMAs as do the near term trends for all of the indexes. The stochastic levels remain overbought across the board but have not given bearish crossover signal as of yet. They may be suggesting some slowing of momentum.

• The data is mixed. There was no change in the McClellan OB/OS Oscillators of note as the NYSE and All Exchange 1 day levels are neural (All Exchange:+47.77/+84.86 NYSE:+44.65/+94.82 NASDAQ:+54.13/+79.89). The rest are in overbought territory. The Equity Put/Call Ratio is a neutral 0.61 with a mildly bullish Total P/C at 0.88. They are being counterbalanced by a very bearish 2.52 OEX Put/Call Ratio as the pros have flipped from being very long calls to very long puts. The Open Insider Buy/Sell Ratio is a neutral 40.0 as are the AAII Bear/Bull Ratio (32.0/31.67) and Investors Intelligence Bear/Bull Ratio (20.2/47.1).

• In conclusion, all of the near term trends remain positive on the charts as do the cumulative advance/decline lines, suggesting the trends should continue to be respected. However, the combination of valuation, stochastics and OB/OS levels may imply at least some slowing of momentum.
• Forward 12-month earnings estimates for the SPX from Bloomberg of $137.37 leave a 5.56 forward earnings yield on a 18.3 forward multiple, over a decade high.
• SPX: 2,460/NA
• DJI: 21,840/NA
• Nasdaq: 6,300/NA
• DJT: 9,382/9,696
• MID: 1,740/1,781
• Russell: 1,414/1,452
• VALUA: 5,589/5,670

More Resistance Levels Violated

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Written By: Guy S. Ortmann, CMT