Data Remains Mostly Neutral
The indexes closed mixed Tuesday with negative internals on the NYSE while the NASDAQ internals were slightly positive. Overall trading volumes declined from the prior session. No technical events of import were registered on the charts although one index did flash a “bearish stochastic crossover” signal. The data remains generally neutral. Thus given the state of the charts and data, we are maintaining our near term “neutral/positive” outlook for the major equity indexes at this time.
- On the charts, the COMPQX (page 3), NDX (page 3) and RTY (page 5) closed higher yesterday with the balance posting losses. There were no alternations of trend on the charts, leaving the SPX (page 2) and DJI (page 2) in short term uptrends with the rest neutral. We would note the SPX did flash a “bearish stochastic crossover” signal although said signal would not become actionable for us unless near term support was violated on a closing basis. The cumulative advance/decline lines remain neutral and above their 50 DMAs for the All Exchange, NYSE and NASDAQ.
- The data continues to be largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:-26.51/-16.27 NYSE:-39.73/-16.53 NASDAQ:-15.73/-15.43). The Open Insider Buy/Sell Ratio remains neutral at 47.5. Bearish signals are coming from the OEX Put/Call Ratio as the pros have loaded up again on puts at 2.51 while the Equity P/C (contrary indicator) finds the crowd somewhat complacent and long calls at 0.52. These are slightly being counterbalanced by a mildly bullish 0.88 Total Put/Call Ratio. Valuation remains a bit stretched with consensus forward 12 month earnings estimates for the SPX at $168.50, leaving the forward 12-month p/e for the SPX at 17.3 versus the “rule of 20” implied fair value of a 16.9 multiple. The “earnings yield” stands at 5.78%. Either a rise in forward estimates, a drop in the 10-year Treasury yield or some market weakness would bring valuation more in line.