Stochastic Levels Overbought
On the charts, all of the indexes closed higher Wednesday with mixed internals on the NYSE while the NASDAQ’s were positive. Trading volumes rose on both exchanges from the prior session. While the indexes did post gains, most closed at the lower end of their intraday ranges. On the other hand, two of the index charts closed above resistance. The data remains neutral, which we find somewhat surprising given the recent market strength. With all of that said, we are maintaining our near term “neutral/positive” outlook for the major equity indexes as no evidence has come to the fore to suggest an alteration.
On the charts, all of the indexes closed higher yesterday but gave up some intraday gains to close near the lows. Nonetheless, internals were positive on the NASDAQ while the NYSE saw positive breadth but slightly negative up/down volume.
- Two charts managed to improve as the NDX (page 3) and VALUA (page 5) both closed above their near term resistance levels.
- The VALUA trend has now turned positive as a result.
- So we now find all of the charts in near term uptrends with the one exception of the RTY (page 5) remaining neutral.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs.
- We would note that all of the charts are now overbought on their respective stochastic levels. However, as mentioned several times in the past, said levels can stay overbought for extended periods. They may become actionable on bearish crossovers.
The data remains stubbornly neutral as are all of the McClellan 1 day OB/OS Oscillators (All Exchange:+24.37 NYSE:+25.01 NASDAQ:+27.81).
- The detrended Rydex Ratio (+0.44) and % of SPX stocks trading above their 50 DMAs (76.0) are neutral as well.
- The Rydex continues to imply 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 at 74.8 has dipped but still shows some insider buying while remaining in neutral territory. Our speculation has been, given we have completed Q1, the increase in buying of late may have been implying greater comfort on the part of insiders regarding their Q1 numbers.
- The 12-month forward consensus earnings estimates from Bloomberg for the SPX stands at $172.15 leaving the forward p/e at a 16.7 multiple while the “rule of twenty” finds fair value at 17.5 As such, the SPX continues to appear to be slightly undervalued.
In conclusion, we are maintaining our near term “neutral/positive” outlook for the major equity indexes as no evidence has appeared to challenge it. Lack of “crowd” enthusiasm remains a positive.