Data Remains Largely Neutral
The indexes closed evenly split Monday with half posting gains as the other half declined. Internals were negative on the NYSE and mixed on the NASDAQ as overall trading volumes declined again on both exchanges. More new closing highs were achieved on the charts but the progress was marginal. All charts remain in short term uptrends. The data remains largely neutral. Thus we are maintaining our near term “neutral/positive” outlook for the major equity indexes until there is a shift in the evidence to suggest otherwise.
On the charts, the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX page 4) closed higher yesterday while making new closing all-time highs. Gains were marginal, however.
- The DJT (page 4), MID (page 4), RTY (page 5) and VALUA (page 5) posted minor losses.
- NYSE internals saw negative breadth and up/down volume while the NASDAQ had negative breadth but positive up/down/volume.
- All charts remain in short term uptrends and above their 50 DMAs.
- The cumulative advance/decline lines are positive on the All Exchange and NYSE while Neutral on the NASDAQ.
- High VAP support levels exist on the COMPQX, DJT, MID and VALUA.
The data remains largely neutral.
- The 1-day McClellan OB/OS Oscillators are all neutral (All Exchange:+14.09 NYSE:+16.62 NASDAQ:+112.62).
- The detrended Rydex Ratio (contrary indicator) at +0.4 is neutral as is the Open Insider Buy/sell Ratio (60.9).
- The new AAII Bear/Bull Ratio (contrary indicator) remains neutral at 30.33/31.67 as well. We continue to view this lack of enthusiasm on the part of the crowd as a positive.
- The % of SPX stocks above their 50 DMAs (82.2) has entered bearish territory but we do not view it as an important “timing” indicator. More negative data would be required.
- The 12-month forward consensus earnings estimate from Bloomberg for the SPX is $173.89, leaving the forward p/e at a 17.3 multiple as it nears fair value as opposed to being slightly undervalued for the past several weeks while the “rule of twenty” finds fair value at 17.9. As such, it is somewhat less compelling than previously viewed but not negative.
- The 10-Year Treasury yield is 2.09%.
- The earnings yield stands at 5.77%.
In conclusion, we have yet to see enough of a shift in the charts and data to warrant a change in our current “neutral/positive” outlook for the major equity indexes at this time.