Data Remains Mostly NeutralOpinion
All of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as volumes rose from the prior session on both exchanges. Multiple new closing highs were achieved on the charts leaving all of the near term uptrends intact. The data is a bit mixed but essentially neutral in its message. So in spite of valuation reaching another new peak, the charts and data continue to suggest the near term trends of the various indexes should continue to be respected until proven otherwise, in our opinion.
- On the charts, all of the indexes closed higher yesterday with positive internals on strong trading volume. New closing highs were achieved on the SPX (page 2), COMPQX (page 3), DJT (page 4), MID (page 4) and VALUA (page 5). The SPX closed back above its near term uptrend line, returning its trend to positive from neutral. As such, all of the indexes remain in their near term uptrends while the cumulative advance/decline lines for the All Exchange and NYSE remain positive with the NASDAQ’s remaining neutral.
- The data is a bit mixed but essentially neutral. All of the McClellan OB/OS Oscillators are neutral (All Exchange:+18.95/+15.83 NYSE:+21.91/+36.57 NASDAQ:+12.48/-4.4) as is the OpenInsider Buy/Sell Ratio at 53.9 which continues to show improvement. The OEX Put/Call Ratio is a bullish 0.81 as the pros are weighted in calls and expect further strength. This is counterbalanced by the Equity Put/Call Ratio (contrary indicator) at 0.47 showing the crowd long calls. Psychology has turned mildly bearish on the AAII Bear/Bull Ratio (contrary indicator) (page 8) for the first time since last January at 24.33/49.0 as they are becoming a bit too excited via that metric. We would also note yesterday’s strength pushed the forward 12 month p/e for the SPX based on Bloomberg consensus 12 month forward earnings estimates to a new high of a 19.2 multiple.
- In conclusion, while the crowd may be getting a bit too enthusiastic and valuation is at a new peak, fighting the current uptrends has been a losing proposition over the past several months. As such, until the charts suggest otherwise, we remain of the opinion that the current near term trends should continue to be respected.
- Forward 12-month earnings estimates for the SPX from Bloomberg of $140.60 leave a 5.31 forward earnings yield on a 19.2 forward multiple.
- SPX: 2,626/NA
- DJI: 24,318/NA
- Nasdaq: 6,826/NA
- NDX: 6,333/NA
- DJT: 10,340/NA
- MID: 1,883/NA
- Russell: 1,525/NA
- VALUA: 5,967/NA