“Neutral/Positive”
Data Remains Mostly Neutral
The major equity indexes closed higher Wednesday with positive internals on the NYSE and NASDAQ as trading volumes rose above those of the prior session. The charts improved with 2 indexes closing above short term resistance and another above its downtrend line. The data remains largely neutral. As yet, we see no evidence appearing to alter our near term “neutral/positive” outlook for the major equity indexes.
On the charts, all of the indexes closed higher with positive internals and higher trading volumes yesterday. Some improvements were seen as follows.
- The SPX (page 2) and COMPQX (page 3) closed above their short term resistance levels while the DJT (page 4) closed above its short term downtrend line, turning its trend neutral from negative.
- Some of the stochastic levels are now overbought but have not produced negative signals at this point.
- So we find the SPX, COMPQX and NDX (page 3) in near term uptrends.
- The MID is still in its short term downtrend while the rest of the indexes are neutral.
- Breadth has continued to improve with the All Exchange, NYSE and NASDAQ cumulative advance/decline lines now positive.
The data remains mostly neutral including the 1 day McClellan OB/OS Oscillators (All Exchange:-14.5 NYSE:-11.4 NASDAQ:-19.3).
- The Open Insider Buy/Sell Ratio (52.8) and detrended Rydex Ratio (0.12) are neutral as well with the OEX Put/Call Ratio a neutral 1.0.
- Valuation finds the spread between the forward p/e for the SPX based on Bloomberg forward 12 month consensus earnings estimates of $167.45 versus the “rule of 20” fair valuation at 16.8 versus 17.4, suggesting the market is currently somewhat undervalued. However, the spread has narrowed over the past several weeks as estimates have declined with issuers generally cutting back their projections during the recent earnings season as the SPX rose in price. While still comparatively undervalued, it is much less so than a few weeks ago.
In conclusion, given the state of the charts, market breadth and current data readings, we are maintaining our near term “neutral/positive” outlook for the major equity indexes.