Insiders Increasing Buying Activity
On the charts, all of the indexes closed higher Thursday with positive internals on the NYSE and NASDAQ as overall trading volumes declined form the prior session. The charts saw a number of improvements. While positive in nature, we would not regard them significant. The data remains largely neutral as well. However, we are seeing an observable increase in insider buying activity, that coming at the end of the quarter may imply greater confidence on their part regarding Q1 earnings results. As such, while none of these issues definitively bullish in nature, we are of the opinion that they have tipped the scales just slightly enough to cause us to raise our near term outlook for the major equity indexes from “neutral” to “neutral/positive”.
On the charts, all of the indexes closed higher yesterday and near their intraday highs with positive internals on lighter trade. Some technical improvements were seen as follows.
- The DJT (page 4) closed back above its 50 DMA and near term resistance while flashing a “bullish stochastic crossover” signal. However, it was unable to penetrate its near term downtrend line.
- The MID (page 4) did manage to violate its short term downtrend line, turning its trend to neutral while the RTY (page 5) closed back above its 50 DMA.
- As such, all of the near term chart trends are neutral with the exceptions of the DJT and RTY remaining negative.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain neutral and above their 50 DMAs.
The data remains largely neutral as are all of the McClellan 1 day OB/OS Oscillators(All Exchange:-6.52 NYSE:+0.47 NASDAQ:-10.72).
- The detrended Rydex Ratio (+0.18) and % of SPX stocks trading above their 50 DMAs (64.4) are neutral as well.
- What catches our eye this morning is the move up in insider buying activity as measured by the Open Insider Buy/Sell Ratio at 64.4 (page 5). While still neutral, it has been steadily increasing of late. Our speculation is that, given we are at the end of Q1, the buying may imply greater comfort on the part of insiders regarding their Q1 numbers.
- Valuation finds the SPX forward p/e based on 12 month forward consensus earnings estimates from Bloomberg of $166.87 at a 16.9 multiple of said estimate while the “rule of twenty” finds fair value at 17.6, largely due to the recent notable drop in the 10 year Treasury yield. As such, the SPX continues to appear to be slightly undervalued.
In conclusion, while there have been no “significant” shifts in the charts and data, they have moved just slightly to a level that allows us to move our near term outlook for the major equity indexes from “neutral” to “neutral/positive”.