Data Neutral
All of the major equity indexes closed higher yesterday with positive internals as overall trading volumes declined form those of the prior session on both the NYSE and NASDAQ. Virtually all of the indexes closed above resistance as others also reclaimed their 50 DMAs. Cumulative breadth improved as well. The data is now neutral across the board. We were mistaken yesterday in assuming the 1 day OB/OS Oscillators had moved back to neutral from overbought as that data was unavailable prior to the open. We were wrong. In fact, the OB/OS was still oversold which we suspect contributed to yesterday’s gains. Yet with the improvements mentioned, we are maintaining our near term “neutral” outlook for the major equity indexes at this time.
On the charts, all of the indexes closed higher yesterday with positive internals as trading volumes slipped from Wednesday’s trade. All closed at or near their intraday highs.
- Multiple chart improvements were registered as the all closed above their respective near term resistance levels.
- As well, the SPX (page 2), COMPQX (page 3), NDX (page 3) and MID (page 4) managed to close back above their 50 DMAs.
- As such, we now find all of the indexes in neutral, sideways trends while the stochastic levels are neutral and have yet to enter overbought territory.
- High “volume at price” (VAP) levels are seen as supportive on the SPX, DJI (page 2) and NDX. They are resistant on the COMPQX, DJT (page 4) and MID.
- Several prior high VAP levels we thought may be troublesome were overcome.
- Cumulative breadth also improved as the NYSE’s A/D is now positive and above its 50 DMA while the All Exchange and NASDAQ’s are neutral.
The data is neutral.
- The 1-day McClellan O/OS Oscillators we mistakenly assumed to be neutral yesterday morning are now, in fact, neutral (All Exchange:-19.18 NYSE:-19.12 NASDAQ:-18.81).
- While remaining neutral at 54.0, the Open Insider Buy/Sell Ratio has seen some lift in buying activity.
- The detrended Rydex Ratio (contrary indicator) finds the leveraged ETF traders neutral as well at -0.37.
- Valuation remains appealing assuming current forward earnings estimates for the SPX hold. The 12-month forward consensus earnings estimate from Bloomberg for the SPX is now $172.21, leaving the forward p/e at a 17.1 multiple while the “rule of twenty” finds fair value at 18.3. This suggests valuation is still more appealing now than just a few weeks ago.
- The 10-Year Treasury yield is 1.72%.
- The earnings yield stands at 5.86%.
In conclusion, yesterday’s positive action was welcome. However, we are maintaining our near term “neutral” outlook for the major equity indexes at this time.