RTY & VALUA Make New Closing Highs

Data Remains Somewhat Cautionary

Opinion

The indexes closed mixed yesterday with positive internals on the NYSE and NASDAQ as volumes rose on the NYSE and declined on the NASDAQ from the prior session. Some new closing highs were achieved while the rest of the charts were generally technically unaffected. The data has increased its warning signals suggesting some degree of caution. However, as all of the short term uptrends remain intact with positive cumulative breadth on the exchanges, we are maintaining our near term “neutral/positive” outlook for the major equity indexes.

• On the charts, The SPX (page 2), DJI (page 2), COMPQX (page 3) and DJT (page 3) closed lower on the day as the DJT dropped below its 50 DMA. The MID (page 4), RTY (page 4) and VALUA (page 5) closed higher with the RTY and VALUA making new closing highs. We find it interesting that, in contrast to just a few weeks ago, the mid and small cap issues are now showing better relative strength to the larger cap indexes. All of the charts remain in their short term uptrends although all are well into overbought territory on their respective stochastic readings. However, such readings are not actionable unless and until they trigger bearish crossover signals that have yet to occur.

• The cautionary signals from the data have intensified a bit. Now all but the COMPQX 21 day McClellan OB/OS Oscillators are overbought (All Exchange:+63.69/+54.78 NYSE:+52.86/+80.04 NASDAQ:+78.07/+36.25) although the NYSE 1 day is only mildly so. The Investors Intelligence Bear/’Bull Ratio (contrary indicator) still finds advisors heavily on the bullish side of the boat at 17.9/54.7. However, the AAII Bear/Bull Ratio (contrary indicator) finds individual investors more concerned at 38.7/25.71. The OEX Put/Call Ratio at 2.32 now finds the pros very heavily weighted in puts and expecting weakness while the Total and Equity Put/Call Ratios are neutral at 0.79/and 0.63.

• In conclusion, while the data may be implying some retracement of the recent notable gains, none of the charts have actually registered signals that would suggest a pullback is now in process. Thus we are keeping our current near term “neutral/positive” outlook for the major equity indexes until such technical signals are generated.

• Forward 12-month earnings estimates for the SPX from IBES of $134.44 leave a 5.63 forward earnings yield on a 17.8 forward multiple, near a decade high.
• SPX: 2,357/2,395
• DJI: 20,659/20,100
• NASDAQ; 5,913/NA
• DJT: 9,132/9,306
• MID: 1,720/1,748
• Russell: 1,379/1,411
• VALUA: 5,447/NA

RTY & VALUA Make New Closing Highs

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Written By: Guy S. Ortmann, CMT