Data Remains Neutral
The indexes closed mostly lower Wednesday with negative internals on the NYSE and NASDAQ as volumes rose on both exchanges from those of the prior session. The NDX and DJT advanced as the rest declined. The charts gave mixed messages as discussed below. The data continues to send a generally neutral message. In our opinion, the overall message of the charts and data continues to suggest we maintain our near term “neutral/positive” outlook for the major equity indexes. However, as we enter earnings season, we may see some increase in volatility.
On the charts, the indexes closed mixed with the NDX (page 3) and DJT (page 4) advancing as the rest declined on negative internals and higher trading volumes.
- The NDX actually managed to make a new all-time closing high. However, this is being counterbalanced by the MID (page 4) closing below its short term uptrend line turning said trend to neutral as is the RTY (page 5). The rest remain in uptrends.
- As the NDX is a narrow index, we would hesitate to overemphasize its achievement. A similar move on a broader based index like the COMPQX would be more encouraging, in our view.
- While the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive, they have weakened just a bit.
- No bearish stochastic crossovers have yet been registered from their current overbought levels.
The data remains largely neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:-22.56 NYSE:-17.33 NASDAQ:-25.71). The fact that they are not overbought given the recent rally is a positive, in our opinion.
- The Open Insider Buy/Sell Ratio remains neutral at 62.3 with the % of SPX stocks trading above their 50 DMAs at neutral with a 69.3% reading.
- Crowd sentiment readings remain neutral with a neutral 0.71 detrened Rydex Ratio and 25.0/36.0 AAII Bear/Bull Ratio.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX now stands at $171.60, leaving the forward p/e at a 16.9 multiple while the “rule of twenty” finds fair value at 17.4. The narrowing of this spread over the past few weeks may have the potential to slow the pace of progress.
In conclusion, we are maintaining our near term market outlook at “neutral/positive” as no evidence has surfaced at this point to cause a change in our opinion. However, we may see an increase in volatility as earnings are announced over the next several days.