Data Neutral
The indexes closed mostly lower yesterday with negative internals on the NYSE and NASDAQ as trading volumes declined on both exchanges from those of the prior session. Most managed to close near their intraday highs. One more index, the DJT, closed below its short term uptrend line on the charts. The data is now neutral across the board. However, forward earnings estimates for the SPX ticked down further as the valuation spread continues to compress. As such, we are maintaining our near term “neutral” outlook for the major equity indexes at this point in time.
On the charts, only the SPX (page 2) and DJI (page 2) managed to post minor gains yesterday as the rest declined.
Market internals were negative on the NYSE and NADAQ as overall trading volumes lightened from the previous session.
The only technical event of note was the DJT (page 4) closing below its short term uptrend line, turning said trend to neutral. It now joins the SPX in that condition as the rest remain positive.
The NDX (page 3) remains on a “bearish stochastic crossover” signal as the balance of the indexes remain overbought by that metric.
The cumulative advance/decline lines are now neutral on both the All Exchange and NASDAQ as the NYSE’s remains positive.
High “volume at price” (VAP) levels remain supportive, in our view.
The data is now entirely neutral, including the 1 day McClellan OB/OS Oscillators for the All Exchange, NYSE and NASDAQ (All Exchange:+25.41 NYSE:+21.1 NASDAQ:+33.69.
The detrended Rydex Ratio (contrary indicator) is also neutral at +0.36 as is the % of SPX stocks trading above their 50 DMAs at 71.3.
Tuesday’s AAII Bear/Bull Ratio (contrary indicators) remained bullish at 37.33/29.0 with the Investor’s Intelligence Bear/Bull Ratio (contrary indicator) staying neutral at 17.9/50.0.
The Open Insider Buy/Sell Ratio remains neutral at 38.5 but has been declining over the past several days.
The appearance of valuation looking appealing, assuming current estimates hold, has compressed with the 12-month forward consensus earnings estimate from Bloomberg for the SPX slipping further to $171.29, leaving the forward p/e at a 17.6 multiple while the “rule of twenty” finds fair value at 18.2. We would note said earnings estimates have been declining over the past two weeks from $172.25.
The 10-Year Treasury yield stands at 1.79%.
The earnings yield is 5.7%.
In conclusion, we have yet to see a sufficient shift in the weight of the evidence on the charts and data to cause a change in our near term “neutral” outlook for the major equity indexes.