Charts Positive As SPX Estimates Pop
On the charts, all of the indexes closed higher Monday with positive internals on the NYSE and NASDAQ as volumes declined from the prior session. Several of the index charts closed above resistance while the data remains notably neutral. As well, forward 12 month earnings estimates for saw a noticeable pop in expectations. As such, while we remain “neutral/positive” in our near term outlook for the major equity indexes, we are now of the opinion that said indexes may hold some positive surprises in store over the next few weeks.
On the charts, all of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ on declining volume. Several charts saw bullish action as follows.
- The DJI (page 2), NDX (page 3), DJT (page 4), MID (page 4) and RTY (page 5) all closed above their near term resistance levels.
- As well, the RTY violated its short term downtrend line, turning its trend to neutral from positive.
- As such, we now find positive short term trends on the SPX (page 2), DJI, NDX, DJT and MID with the COMPQX (page 3), RTY and VALUA neutral.
- Also, the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are now all positive and above their 50 DMAs.
- We would also note only one of the indexes, the DJT, has moved into overbought territory on its stochastic reading as the rest are neutral in spite of the recent gains.
The data remains remarkably neutral as are all of the McClellan 1 day OB/OS Oscillators (All Exchange:+30.93 NYSE:+42.02 NASDAQ:+25.01).
- The detrended Rydex Ratio (+0.44) and % of SPX stocks trading above their 50 DMAs (70.0) are neutral as well.
- The Rydex is suggesting an absence of enthusiasm on the part of the leveraged ETF traders that we view as an important plus.
- Insider buying activity as measured by the Open Insider Buy/Sell Ratio has jumped to 94.7 (page 5), although remaining neutral. Our speculation has been, given we have completed Q, the increase in buying may have been implying greater comfort on the part of insiders regarding their Q1 numbers.
- That appears to be validated this morning as the 12 month forward consensus earnings estimates from Bloomberg has jumped from $166.82 to $172.13.
- The SPX forward p/e is a 16.7 multiple of said estimate while the “rule of twenty” finds fair value at 17.5 As such, the SPX continues to appear to be slightly undervalued.
In conclusion, while we maintain our near term “neutral/positive” outlook for the major equity indexes, the charts, data and valuation suggest some positive surprises may occur over the next few weeks.