NYSE: Charts And Data Remain Largely Neutral

SPX Forward 12 Month Earnings Estimates Rise

Opinion: All of the indexes closed higher yesterday with positive internals as volumes rose from the prior session. All closed at or near their intraday highs. While the short term sideways trends remain intact on the charts, there were a couple of minor improvements. The data remains mostly neutral. However, IBES has lifted its forward 12 month earnings estimates for the SPX by over a dollar that may assuage some of the fears that have been expressed by the pundits regarding Q1 earnings results. So although there is some slight improvement in the weight of the evidence, we are inclined to stay “neutral” for the near term until resistance levels are violated. The intermediate term remains “neutral” as well as the lift in SPX estimates still leaves valuation approaching historically high levels.

• On the charts, it was a positive day as all of the indexes closed higher and near their intraday highs with higher volume and positive internals. However, none of the current resistance levels were violated that would result in a shift from their current sideways patterns. Two improvements came in the form of the COMPQX (page 3) closing back above its 200 DMA and the DJT (page 3) flashing a bullish stochastic crossover signal. The DJT signal may be of greater import as the implication of some further DJT strength would, in our opinion, add to the probabilities of better general market strength as we still regard the DJT as the “leading” equity index.

• The data remains largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+17.37 NYSE:+24.7 NASDAQ:+6.46). The OEX Put/Call Ratio (smart money) has dropped its prior cautionary reading to a neutral 1.21. The Total and Equity Put/Call Ratios (contrary indicators) are both positive as the crowd has become a bit more nervous and increasing put exposure at 0.93 and .72 respectively. Thus the data remains neutral with a slightly positive edge.

• Finally, IBES has increased its forward 12 month earnings estimates for the SPX from $122.64 to $123.79.

• In conclusion, our near term outlook remains neutral as resistance levels and sideways patterns remain intact with largely neutral data as well. And although the SPX estimates have lifted, forward valuation remains a bit stretched leaving us “neutral” in that regard as well.

• Forward 12 month earnings estimates for the SPX from IBES of $123.79 leave a 6.0% forward earnings yield on a 16.7 forward multiple.

SPX: 2,025/2,076

DJI: 17,438/17,859

COMPQX; 4,775/4,924

DJT: 7,604/7,937

MID: 1,405/1,451

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RUT: 1,065/1,120

VALUA: 4,385/4,552

Morning Technical Note

Written By: Guy S. Ortmann, CMT