Data Mixed
The bulk of the indexes closed higher Friday with the one exception of the DJT posting a loss. Breadth was positive on both exchanges as NYSE trading volume declined from the previous session while the NASDAQ’s increased. The one notable technical event on the charts was the DJI managing to close above near term resistance. The bulk of the index charts remain in near term uptrends while the data has become a bit more mixed in its message. Nonetheless, we find it appropriate, given the charts and data, to maintain our near term “positive” outlook for the major equity indexes.
- On the charts, all but the DJT (page 4) closed higher Friday with positive market breadth. The DJI (page 3) closed above its near term resistance leaving all the charts in short term uptrends with the exception of the NDX (page 3) being neutral. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain I uptrends as well. While the stochastic levels remain overbought, we see no sell signals appearing on the charts at this time.
- The data has turned a bit more mixed with all of the McClellan OB/OS Oscillators in overbought territory (All Exchange:+58.13/+111.48 NYSE:+58.04/+134.26 NASDAQ:+59.54/+93.19). The Open Insider Buy/Sell Ratio is remains cautionary as well as insiders have become predominantly sellers at 20.1 (page 9). On the other hand, The detrended Rydex Ratio (contrary indicator) remains neutral at 0.27 as does the AAII Bear/Bull Ratio at 26.0/35.0, both showing a lack of “irrational exuberance” on the part of the crowd. Valuation finds the SPX forward 12 month estimates from Bloomberg at $167.71 as it remains “undervalued” at a forward 12 month p/e of 16.6 as it is nearing the “rule of 20” implied fair value of a 17.4 multiple. The earnings yield stands at 6.03%. We continue to view the lack of investor exuberance within the AAII Bear/Bull Ratio and detrended Rydex Ratio as positive.
- In conclusion, as we have yet to see sell signals appear on the charts as they largely remain in uptrends with positive breadth while crowd sentiment remains neutral, we feel it appropriate to maintain our near term positive outlook for the major equity indexes intact at this point in time.
- SPX: 2,723/2,796
- DJI: 25,542/26.370
- Nasdaq: 7,353/7,525
- NDX: 6,845/7,110
- DJT: 10,298/10,675
- MID: 1,864/1,956
- Russell: 1,509/1,587
- VALUA: 6,097/6,330