Data Remains Mostly NeutralOpinion
The indexes closed mixed yesterday but well off of their intraday lows with mixed internals on the NYSE and positive internals on the NASDAQ. Trading volumes were lighter on both exchanges from the prior session leaving no major technical signals on the charts being registered. The data remains largely neutral with some slight encouragement form a few of the put/call ratios. So while we remain a bit concerned about the recent deterioration in market breadth, we have yet to see enough evidence being presented to alter our near term “neutral” outlook for the major equity indexes.
- On the charts, the indexes closed mixed with the DJI (page 2) and DJT (page 4) closing lower in the day as the rest managed to post advances. Looking under the hood, while it was encouraging to see the indexes rally to well above their intraday lows, the fact that overall volumes were lighter and the NYSE seeing positive breadth but negative up/down volume tarnishes their achievements to some degree, in our opinion, The RTY (page 5) did manage to close back above its 50 DMA but remains in a neutral trend as do all of the others with the exception of the DJI that is still technically in a short term downtrend. And speaking of the DJI, we would note that it saw another test of support for the third time in the past six sessions at the 23,825 level. While it has held to this point, we believe any break of support would likely take on greater significance. Market breadth remains of some concern as the NASDAQ cumulative advance/decline line remains negative and below its 50 DMA. The A/Ds for the All Exchange and NYSE are still neutral and above their 50 DMAs.
- The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:-12.94/+31.69 NYSE:-12.88/+38.65 NASDAQ:-15.44/+26.688). The Equity Put/Call Ratio (0.68) and OpenInsider Buy/sell Ratio (45.5) are neutral as well while the Total P/C (1.11) and OEX P/C (0.51) are bullish as of the close. Valuation finds the forward 12 month P/E for the SPX based on forward 12 month consensus earnings estimates from Bloomberg of $162.09 at a 16.4 multiple versus the “rule of 20” implied fair value of 17.0.
- In conclusion, while breadth is showing some possible trouble, the combination of chart trends combined with the data suggest our near term outlook for the major equity indexes should remain “neutral” at this point in time.
- SPX: 2,613/2,683
- DJI: 23,825/24,690
- NASDAQ: 6,959/7,177
- NDX: 6,459/6,700
- DJT: 10,391/10,788
- MID: 1,873/1,912
- MID: 1,545/1,595
- VALUA: 6,028/6,142