Data Essentially Neutral
The bulk of the major equity indexes closed lower Tuesday with positive internals on the NYSE and negative internals on the NASDAQ as overall trading volumes rose on both exchanges from the prior session. A couple of shifts were seen on the charts, raising a few yellow flags. The data remains generally neutral. However, forward earnings estimates for the SPX continue to slip. While our daily review of over 1200 individual equity charts gives us some concern, we are maintaining our near term “neutral” outlook for the major equity indexes at this time with the caveat that some clouds are starting to gather.
On the charts, the bulk of the major equity indexes closed lower yesterday with positive internals on the NYSE while the NASDAQ’s were negative.
- Trading volumes rose on both exchanges.
- The two exceptions were the DJT (page 4) and RTY (page 5) posting gains.
- A couple of events occurred on the charts. While they were not “major”, they do raise a few clouds.
- The NDX (page 3) closed below its short term uptrend line while flashing a “bearish stochastic crossover” signal while the DJI (page 2) flashed a bearish crossover as well.
- So now all of the near term trends are neutral with only the SPX (page 2) and DJT (page 4) in short term uptrends.
- The stochastic levels remain overbought on those indexes that did not turn bearish yesterday while the cumulative advance/decline line for the All Exchange, NYSE and NASDAQ remain positive.
- Yet with the positive A/Ds, we are seeing, in our opinion, a significant number of stocks that appear to be rolling over during our daily scan of 1,200 names.
- High “volume at price” (VAP) are supportive across the board.
The data remains mostly neutral including all of the 1-day McClellan OB/OS Oscillators (All Exchange:+42.87 NYSE:+44.37 NASDAQ:+44.11).
- The detrended Rydex Ratio (contrary indicator) is bullish at -1.61 suggesting a more cautious crowd outlook.
- Yesterday’s AAII Bear/Bull Ratio (contrary indicators) remains bullish at 38.0/24.67, echoing the Rydex data.
- However, the Investor’s Intelligence Bear/Bull Ratio (contrary indicator) remained bearish at 17.0/49.1 suggesting an excess of bullish sentiment on the part of investment advisors continues.
- The % of SPX stocks trading above their 50 DMAs is a neutral 64.0% as is the Open Insider Buy/Sell Ratio at 48.3.
- Valuation seems appealing, but less so, with forward 12-month earnings estimates for the SPX slipping yet again to $173.06 via Bloomberg, leaving the forward p/e at a 17.3 multiple while the “rule of twenty” finds fair value at 18.2. Said SPX estimates have been shrinking daily over the past several sessions.
- The 10-Year Treasury yield stands at 1.77%.
- The earnings yield is 5.78%.
In conclusion, we have yet to see enough of a shift on the charts and data to alter our near term “neutral” outlook for the major equity indexes.