Data Essentially Neutral
The major equity indexes closed lower Friday with the one exception of the DJT posting a gain. Internals were mildly positive on the NYSE and negative on the NASDAQ as overall trading volumes declined on the NYSE and rose on the NASDAQ from the prior session. The charts saw one technical event worthy of comment appear as the COMPQX closed below its near term uptrend line. The data is generally neutral. However, the consensus forward 12 month earnings estimates for the SPX saw a further decline while the NASDAQ’s cumulative advance/decline line remains troubling. Thus we are maintaining our near term “neutral” outlook for the major equity indexes at this time.
On the charts, the bulk of the major equity indexes closed lower Friday with the exception of the DJT (page 4) posting a gain while NYSE internals were modestly positive and those of the NASDAQ were negative.
- The one event of note was the COMPQX (page 3) closing below its near term uptrend line, turning said trend to neutral from positive.
- As such, we now find the bulk of the near term trends for the major equity indexes in neutral with only the SPX (page 2) and NDX (page 3) positive.
- This current state of the near term trends is similar to our concerns noted last week regarding the cumulative advance/decline line for the NASDAQ making a notably lower high during the recent rally, both of which suggest a weakening technical foundation, in our opinion.
- The stochastic levels are overbought on all of the indexes but have not yet yielded “bearish crossover” signals.
- The cumulative advance/decline lines are positive on the All Exchange NYSE and NASDAQ while high “volume at price” (VAP) levels are generally supportive.
The data remains mostly neutral including all of the 1-day McClellan OB/OS Oscillators (All Exchange:+28.54 NYSE:+24.56 NASDAQ:+33.73).
- The detrended Rydex Ratio (contrary indicator) is bullish at -1.77 suggesting a more cautious crowd outlook.
- Last week’s AAII Bear/Bull Ratio (contrary indicators) also turned bullish at 38.67/23.33, echoing the Rydex data. However, the Investor’s Intelligence Bear/Bull Ratio (contrary indicator) remained bearish at 17.2/47.6 suggesting an excess of bullish sentiment on the part of investment advisors continues.
- The % of SPX stocks trading above their 50 DMAs is a neutral 61.6%. as is the Open Insider Buy/Sell Ratio at 50.5.
- Valuation seems appealing, but a bit less so, with forward 12 month earnings estimates for the SPX slipping again to $173.27 via Bloomberg, leaving the forward p/e at a 17.2 multiple while the “rule of twenty” finds fair value at 18.3. Said SPX estimates have been shrinking daily over the past several sessions.
- The 10-Year Treasury yield stands at 1.75%.
- The earnings yield is 5.8%.
In conclusion, we have yet to see enough of a shift on the charts and data to alter our near term “neutral” outlook for the major equity indexes.