Data Remains Largely Neutral
On the charts, all of the indexes closed higher Friday with positive internals on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. A couple of minor chart improvements occurred, following on those noted in last Friday’s note. The data remains almost entirely neutral. While the valuation spread has narrowed, at this point we do not see enough of a shift in the weight of the evidence to alter our near term “neutral/positive” outlook for the major equity indexes.
On the charts, all of the indexes closed higher Friday with positive internals on heavier trading volume.
- Improvements on the charts came in the form of the NDX (page 3) closing above its short term resistance level while the DJT closed above its short term downtrend line, turning its trend to neutral.
- As such, all of the indexes are now in near term neutral trends with the exception of the RTY (page 5) remaining negative.
- The VALUA cumulative advance/decline line turned positive while the NYSE’s and NASDAQ’s remain neutral.
- All of the stochastic levels remain neutral as well.
The data remains largely neutral as are all of the McClellan 1 day OB/OS Oscillators (All Exchange:+4.26 NYSE:+11.24 NASDAQ:+0.93).
- The detrended Rydex Ratio (+0.22) and % of SPX stocks trading above their 50 DMAs (68.9) are neutral as well.
- As noted last Friday morning, insider buying activity as measured by the Open Insider Buy/Sell Ratio at 68.9 (page 5), while remaining neutral, has seen a notable increase in buying activity of late. Our speculation remains hat, given we have completed Q1, the buying may imply greater comfort on the part of insiders regarding their Q1 numbers.
- Valuation finds the SPX forward p/e based on 12 month forward consensus earnings estimates from Bloomberg of $166.82 at a 17.0 multiple of said estimate while the “rule of twenty” finds fair value at 17.6.
- The narrowing of the spread is due to the recent notable drop in the 10 year Treasury yield and increase in the SPX. As such, the SPX continues to appear to be slightly undervalued.
In conclusion, given the current state of the charts and data, we are maintaining our “neutral/positive” outlook for the major equity indexes..