Charts And Breadth See Improvement

SPX Forward Earnings Estimates Rise

Opinion

All of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as NYSE volumes declined from the prior session while NASDAQ volumes rose. Three of the index charts saw some improvements as did some of the cumulative advance/decline lines. The data has turned largely neutral from yesterday’s positive signals while the forward 12 month earnings estimates for the SPX from Bloomberg were raised thus moderating valuation to some degree. At this stage, the near term trends of the indexes remain mixed as we continue to suggest they be respected for their individual implications.

• On the charts, all of the indexes rose yesterday with positive internals as all closed at or near their intraday highs. Three indexes saw technical improvement as the COMPQX (page 3) made a new closing high, the RTY (page 5) closed above its 50 DMA, and short term downtrend line and the VALUA closed above its 50 DMA, short term downtrend line and resistance. As such, the various trends of the indexes are as follows. Positive: COMPQX, NDX (page 3). Neutral: SPX (page 2), DJI (page 2), MID (page 4), RTY, VALUA. Negative: DJT. We would also note the cumulative advance decline lines for the All Exchange and NYSE closed back above their 50 DMAs. However, they and the NASDAQ remain in downtrends at present.

• The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:-23.2/-23.59 NYSE:-36.38/-17.06 NASDAQ:-11.34/-26.69). The Equity and OEX Put/Call Ratios are neutral at 0.64 and 1.19 respectively along with a 49.5 Open Insider Buy/Sell Ratio. The Total Put/Call Ratio (contrary indicator) is a bullish 0.95.

• Finally, Bloomberg’s consensus forward 12 month earnings estimates for the SPX were raised from $136.79 to $140.60, a sizable lift. As such, it does take some pressure off of valuation that continues to be in the historically high range.

• In conclusion, some relief on the charts, breadth and valuation are welcome but we remain of the opinion that market advances remain selective thus warranting respecting the near term trends of the various indexes on their own merit.
• Forward 12-month earnings estimates for the SPX from Bloomberg of $110.60 leave a 5.46 forward earnings yield on a 18.4 forward multiple.
• SPX: 2,547/2,594
• DJI: 22,879/23,567
• NASDAQ: 6,557/6,753
• NDX: 5,994/NA
• DJT: 9,380/9,750
• MID: 1,810/1,843
• Russell: 1,450/1,492
• VALUA: 5,650/5,839