Data Remains Mostly Neutral
The major equity indexes closed mostly higher Tuesday with the exception of the DJI and DJT posting losses. Internals were positive on the NYSE and NASDAQ as NYSE volumes declined from the prior session while the NASDAQ’s were flat. One index closed above resistance while two others were tested. The data remains largely neutral in nature. Given the recent action, we now suspect the NDX and COMPQX may lead the markets higher, dragging the others along but less so. As such, we are shifting our opinion to “neutral/positive” but with the caveat that market participation may become much more selective.
On the charts, The DJI (page 2) and DJT (page 4) closed lower yesterday while the rest advanced with positive breadth but generally lighter volume.
- The NDX (page 3) managed to close above resistance, turning its trend positive, while the SPX (page 2) and COMPQX (page 3) closed at resistance.
- So the near-term trends are now mixed with the NDX positive, DJT (page4) and MID (page 4) negative and the rest neutral.
- The bullish stochastic crossovers noted recently appear to have been prescient.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are neutral and above their 50 DMAs.
- In a nut shell, due to recent action, we now suspect the markets will become much more selective regarding upward participation than the generally mass move of stocks off of December’s lows.
The data is mostly neutral including the 1-day McClellan OB/OS Oscillators (All Exchange:-36.61 NYSE:-36.68 NASDAQ:-38.87).
- The Open Insider Buy/Sell Ratio (49.4) and detrended Rydex Ratio (0.48) are neutral as well with the OEX Put/Call Ratio bullish at 1.01.
- Valuation finds the spread between the forward p/e for the SPX based on Bloomberg forward 12-month consensus earnings estimates of $167.47 versus the “rule of 20” fair valuation at 16.7 versus 17.4, suggesting the market is currently somewhat undervalued. However, the spread has narrowed over the past several weeks as estimates have declined with issuers generally cutting back their projections during the recent earnings season as the SPX rose in price. While still comparatively undervalued, it is much less so than a few weeks ago.
In conclusion, we find ourselves in the unusual position of shifting to a “neutral/positive” outlook for the major equity indexes with a heightened likelihood that finding the right stocks to participate will be much more difficult than over the past 2 ½ months.