Data Mostly NeutralOpinion
The indexes closed mixed Friday with positive internals on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. The charts saw two more cautionary signals triggered, leaving their short term trends mixed. The data is largely neutral with a couple of bearish signals mixed in. In our opinion, the weight of the evidence has shifted just enough to warrant a change in our near term outlook for the major equity indexes from “neutral” to “neutral/negative”.
- On the charts, the indexes closed mixed Friday with positive internals on heavy trading volume. The SPX (page 2), DJI (page 2), MID (page 4) and VALUA (page 5) closed higher as the rest posted losses on the day. Two of the charts saw technical breaks worthy of note that raise some yellow flags. The NDX (page 3) closed below its short term uptrend line for the first time since late April, turning its trend neutral form positive while the DJT (page 4) closed below support as well as its short term uptrend ;line, also turning its trend neutral. As such we now find the trends negative on the DJI, neutral on the SPX, COMPQX, NDX, DJT and positive on the MID, RTY and VALUA. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are neutral and above their 50 DMAs. We would also note the VIX tested resistance at the 14.78 level. Should it be violated, near term prospects would likely darken.
- The data is mostly neutral including all of the McClellan OB/OS Oscillators (All Exchange:+34.48/-17.15 NYSE:+47.57/-11.26 NASDAQ:+26.45/-24.16). The Equity Put/Call Ratio (0.56) and OpenIsider Buy/Sell Ratio (35.4) are neutral as well while the OEX P/C is a very bearish 2.04 as the pros are heavy in puts as is the Rydex Ratio (contrary indicator) at .166 finding the leveraged ETF traders heavily leveraged long. Valuation finds the SPX based on the forward 12 month consensus earnings estimates from Bloomberg of $163.49 at a 16.9 multiple versus the “rule of 20” implied fair value of 17.1.
- In conclusion, given the recent weakening in the charts combined with some excessive bullish sentiment on the part f investors, we now find just enough of a shift in the evidence to alter our near term outlook from “neutral” to “neutral/negative”.
- SPX: 2,736/2,784
- DJI: 24,342/25,147
- NASDAQ: 7,591/NA
- NDX: 7,096/NA
- DJT: 10,731/10,984
- MID: 1,950/2,000
- Russell: 1,628/NA
- VALUA: 6,291/6,463