“Neutral/Positive”Data Remains Mostly Neutral
NYSE while the NASDAQ’s internals were positive. Volumes declined on both exchanges from the prior session. No technical events of import were generated on the charts while the data continues to send a largely neutral message. The fact that the psychology data continues to show a lack of enthusiasm on the part of the “crowd” while the rest of the data is neutral and SPX earnings estimates are on the rise, we are maintaining our near term “neutral/positive” outlook for the major equity indexes while suspecting the markets may have some positive surprises over the next few weeks.
On the charts, the indexes closed mixed yesterday with the SPX (page 2), COMPQX (page 3) and NDX (page 3) posting gains as the rest declined.
- Internals were negative on the NYSE and positive on the NASDAQ.
- Our recent speculation that the NASDAQ and NDX may be the better performers remains in place.
- No technical events of import were generated on the charts. As such, all of the index charts are now in short term uptrends with the exceptions of the RTY (page 5) and VALUA (page 5) remaining neutral.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs.
- Several of the stochastic readings have moved into overbought territory but may remain so for extended periods. Bearish crossovers would be required to raise a yellow flag.
The data remains remarkably neutral as are all of the McClellan 1 day OB/OS Oscillators (All Exchange:+19.47 NYSE:+22.05 NASDAQ:+20.24).
- The detrended Rydex Ratio (+0.51) and % of SPX stocks trading above their 50 DMAs (76.4) 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 88.8 still shows active insider buying while remaining in neutral territory. Our speculation has been, given we have completed Q1, the increase in buying 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 $172.30 leaving the forward p/e at a 16.6 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.