DJT Breaks Support

Data Remains Mostly Neutral

Opinion

The bulk of the indexes closed lower yesterday with negative internals on the NYSE while NASDAQ internals were mixed. Volumes rose notably from those of the prior session. One negative technical event occurred on the charts while the data remains generally neutral in nature. So although breadth and general recent market action are causing us a bit of concern, we have yet to see enough of an actual shift on the charts and data to warrant a change in our current near term “neutral” outlook for the major equity indexes.

• On the charts all of the indexes closed lower yesterday with the one exception of the RTY (page 5) managing to post a gain. Internals were negative on the NYSE and mixed on the NASDAQ as volumes rose. Again, with the exception of the RTY, all gave up earlier gains to close at or near their intraday lows. One negative event occurred on the charts as the DJT (page 4) closed below near term support, turning its short term trend negative and joining the DJI (page 2) in that trend. We would note the DJT’s stochastic is now oversold but has yet to yield a bullish crossover signal. The rest of the indexes remain in sideways neutral trends as are the cumulative advance/decline lines for the All Exchange, NYSE and NASADAQ. The MID (page 4) and VALUA (page 5) closed very near support that, if broken, would change their trends to negative while the NDX (page 3) tested resistance and failed.

• The bulk of the data continues to send a neutral message as well, including all of the McClellan OB/OS Oscillators (All Exchange:-9.81/+31.69 NYSE:-12.88/+23.19 NASDAQ:-7.25/+20.04). The Equity Pu/Call Ratio (0.68) and OpenInsider Buy/Sell Ratio (45.5) remain neutral; with the Total P/C (0.93) and OEX P/C (0.79) on bullish signals. Valuation finds the forward 12 month P/E for the SPX based on forward 12 month consensus earnings estimates from Bloomberg of $162.34 at a 16.2 multiple versus the “rule of 20” implied fair value of 17.0.

• In conclusion, while we find some of the recent action and breadth to be of some concern, there is not yet, in our opinion, enough actual change in the weight of the evidence to cause a shift in our near term “neutral” outlook for the major equity indexes.
• SPX: 2,613/2,683
• DJI: 23,825/24,690
• Nasdaq: 6,959/7,177
• NDX: 6,459/6,700
• DJT: 10,183/10,565
• MID: 1,873/1,912
• Russell: 1,545/1,595
• VALUA: 6,028/6,142