More New Closing Highs Registered

Data Neutral As Valuation Lifts

Opinion

All of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as volumes rose from the prior session. New closing highs were achieved across the board with only one exception. As such, the charts remain largely positive while the data is mixed to neutral. Valuation has lifted back to near its recent highs that may slow progress near term. However, we remain of the opinion that the near term trends of the indexes should continue to be respected until proven otherwise.

• On the charts, all of the indexes closed higher yesterday on good volume and positive internals. Virtually all of the indexes made new closing highs with the one exception of the DJT (page 4) that rallied to resistance. The DJI (page 2) finally penetrated resistance to its new closing high turning its near term trend to positive from neutral. As such, all of the index charts are now positive with, again, the one exception of the DJT that is neutral. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs.

• The data is mixed to neutral with all of the McClellan OB/OS Oscillators remaining neutral (All Exchange:+37.01/+19.7 NYSE:+35.24/+28.19 NASDAQ:+39.92/+13.95) as is the Open Insider Buy/Sell Ratio at 33.7. The Put/Call Ratios are counterbalancing with the Total and Equity (contrary indicators) bearish at 0.68 and 0.5 as the crowd is long calls while the pros are long calls indicated by a bullish 0.9 OEX Put/Call Ratio. As such, the data is not sending any particularly strong implications at present.

• Valuation has lifted given the recent market strength back up to an 18.7 forward multiple of Bloomberg consensus forward 12-month earnings of $140.60. So valuation is back to approaching its recent historical highs. Our guess is that valuation may now become a bit of a headwind for further notable progress.

• In conclusion, while valuation has reentered as a potential issue, given the current state of the charts and data, we remain of the opinion that the near term trends of the indexes continue to be respected until proven otherwise.

• Forward 12-month earnings estimates for the SPX from Bloomberg of $140.60 leave a 5.46 forward earnings yield on a 18.7 forward multiple.
• SPX: 2,589/NA
• DJI: 23,427/NA
• NASDAQ: 6,759/NA
• NDX: 6,292/NA
• DJT: 9,380/9,750
• MID: 1,825/NA
• Russell: 1,500/NA
• VALUA: 5,837/NA