Data Mixed
Opinion: The bulk of the indexes closed higher Friday with the one exception of the NDX. Internals were positive on the NYSE and NASDAQ as volumes declined from the prior session on both exchanges. The charts saw two more new closing highs achieved with most remaining in near term uptrends. However, the data remains mixed. As such we remain near term neutral in our outlook for the major equity indexes as there is enough evidence to suggest some consolidation/retracement of the recent gains.
- On the charts, only the NDX closed lower Friday as the rest posted gains on the session. Internals were positive on light volume. The MID (page 4) and VALUA (page 5) closed above resistance to make new closing highs. So all of the indexes are in short term uptrends with the exception of the DJT (page 4) being neutral. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs. However, the stochastic levels remain very overbought in every case except the DJT. As stated before, the stochastics can stay overbought for extended periods. However, in our opinion, they do imply some degree of risk is present at current levels. The VIX concurs as it remains near its 2018 lows that suggest some room for volatility reentering the markets.
- The data is mixed. Most of the McClellan OB/OS Oscillators remain in overbought territory except the 1 day All Exchange and NASDAQ that are neutral (All Exchange:+36.59/+59.17 NYSE:+52.35/+73.05 NASDAQ:+25.84/+51.28). The Equity Put/Call Ratio (0.6), OEX P/C (1.13) and OpenInsider Buy/Sell Ratio (28.4) are neutral although we would restate our observation that insiders saw a notable increase in selling activity over the past week as the markets advanced. The Total P/C (contrary indicator) is bullish at 0.95. Valuation finds the SPX close to fair valuation based on the forward 12 month consensus earnings estimates from Bloomberg of $163.40 at a 17.0 multiple versus the “rule of 20” implied fair value of 17.1.
- In conclusion, the stochastic levels combined with the OB/OS oscillators, insider selling, VIX and valuation suggest we maintain our near term “neural” outlook for the major equity indexes as better buying opportunities may present themselves over the near term.
- SPX: 2,736/2,784
- DJI: 24,665/25,337
- NASDAQ: 7,418/NA
- NDX: 6,943/NA
- DJT: 10,713/10,995
- MID: 1,950/NA
- Russell: 1,628/NA
- VALUA: 6,291/NA