Near Term Outlook Remains “Neutral/Negative”
Data Neutral
The indexes closed mixed Friday with positive internals on the NYSE and NASDAQ as volumes declined on both exchanges from the prior session. No technical events of import were generated on the charts, leaving the bulk of the indexes in short term downtrends, while the data remains in a largely neutral state. As such, we are maintaining our near term “neutral/negative” outlook for the major equity indexes at this time.
On the charts, the indexes closed mixed Friday with positive internals as overall trading volumes declined from those of the prior session on the NYSE and NASDAQ.
No technical events of import were generated. As such, all of the indexes are in short term downtrends with the one exception of the US500 (page 2) being neutral.
All remain below their 50 DMAs as well.
The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are negative with the NASDAQ and All Exchange below their 50 DMAs.
The volume at price (VAP) levels find the DJI (page 2), COMPQX (page 3) and MID (page 4) above high volume offering good support while the NDX (page 3), DJT (page 4) and VALUA (page 5) are below levels that would suggest significant overhead resistance.
The stochastic levels are oversold on the COMPQX, NDX, DJT, MID and VALUA but have yet to trigger bullish crossover signals.
The data is neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:-41.06 NYSE:-39.18 NASDAQ:-44.19).
The detrended Rydex Ratio (-0.69), Open Insider Buy/Sell Ratio (67.0) and % of SPX stocks above their 50 DMAs (41.8) are all neutral as well.
Sentiment remains neutral with last week’s AAII Berar/Bull Ratio at 27.67/37.0. However, the Investors Intelligence Bear/Bull Ratio (contrary indicator) is negative at 17.5/51.4. New readings this week have yet to be posted.
The 12 month forward consensus earnings estimate from Bloomberg for the SPX stands at $171.32, leaving the forward p/e at a 16.5 multiple while the “rule of twenty” finds fair value at 17.7, easing our prior valuation concerns when the SPX was trading at fair value a few weeks ago, assuming current estimates hold. The earnings yield stands at 6.06%.
In conclusion, we have yet to see a shift in the weight of the evidence to alter our ear term “neutral/negative” outlook for the major equity indexes.
- SPX: 2,819/2,855
- DJI: 25,252/25,922
- COMPQX; 7,571/7,796
- NDX: 7,248/7,471
- DJT: 10,021/10,344
- MID: 1,841/1,890
- RTY: 1,484/1,557
- VALUA: 5,912/6,055