Data Remains Largely Neutral
The indexes closed mixed Thursday with mixed internals on the NYSE and negative internals on the NASDAQ. Volumes declined on both exchanges from those of the prior session. In our opinion, there has not been a sufficient shift in the weight of the evidence to alter our near term “neutral/positive” outlook for the major equity indexes.
On the charts, the indexes closed mixed yesterday with the SPX (page 2), DJT (page 4) and MID (page 4) closing higher as the rest posted losses.
- Internals were negative in the NASDAQ while the SPX saw positive breadth but negative up/down volume.
- The charts saw some minor mixed messages as the DJI (page 2) closed below its short term uptrend line, turning said trend to neutral while the DJT (page 4) closed above its near term resistance level. As such, the trends remain positive on all but the DJI and RTY (page 5) that are neutral.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs.
The data remains largely neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:+10.58 NYSE:+16.36 NASDAQ:+7.11).
- The Open Insider Buy/Sell Ratio remains neutral but higher at 70.3 with the % of SPX stocks trading above their 50 DMAs at neutral with a 78.8% reading.
- Crowd sentiment readings remain neutral in spite of the fact that the DJI has rallied over 4,500 points from its December low. They remain remarkably under enthusiastic with a neutral 0.78 detrened Rydex Ratio and 26.0/35.0 AAII Bear/Bull Ratio.
- We reiterate we have found that excessive enthusiasm displayed in these two indicators tend to be prescient signals prior to market contractions. That is not the case currently.
- The OEX Put/Call Ratio remains bearish but moderating to 2.15. We reiterate this data point’s forecasting ability has deteriorated over the past several months and, as such, is no longer considered prescient, in our view.
- The 12 month forward consensus earnings estimates from Bloomberg for the SPX stands at $171.99, leaving the forward p/e at a 16.8 multiple while the “rule of twenty” finds fair value at 17.5 As such, the SPX continues to appear to be slightly undervalued. The “earnings yield” is 5.96%.
In conclusion, we are maintaining our near term market outlook at “neutral/positive” given the current state of the charts and data.