Near Term Outlook Remains “Neutral/Positive”
Data Largely Neutral
The indexes closed mixed Friday with mixed internals on the NSYE while The Nasdaq’s internals were positive. Volumes rose from those of the prior shortened session. No technical events of import were generated on the charts. The data remains largely neutral. As such, we have yet to see a shift in the evidence to alter our near term “neutral/positive” outlook for the major equity indexes.
On the charts, the indexes closed mixed Friday with the MID (page 4), RTY (page 5) and VALUA (page 5) closing higher as the rest posted losses.
- No technical events of import were generated on the charts, leaving all in their current near term uptrends.
- The cumulative advance/decline lines for the All Exchange/NYSE and NASDAQ remain positive.
- High “volume at price” levels remain supportive on all of the indexes except the DJT (page 4) and MID where they are viewed as resistant.
The data is largely neutral.
- The 1 day McClellan OB/OS Oscillators are neutral on the All Exchange and NYSE while slightly overbought on the NASDAQ (All Exchange:+49.23 NYSE:+46.16 NASDAQ:+54.96).
- The detrended Rydex Ratio (contrary indicator) at +0.55 is neutral as is the Open Insider Buy/sell Ratio (61.7)
- However, the % of SPX stocks above their 50 DMAs (80.0) has moved into bearish territory as a result of the recent rally.
- Last week’s AAII Bear/Bull Ratio (contrary indicator) at 32.67/28.0 is mildly bullish. We continue to view this lack of enthusiasm on the part of the crowd as a positive.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX stands at $174.25, leaving the forward p/e at a 17.2 multiple while the “rule of twenty” finds fair value at 18.0, suggesting the SPX remains slightly undervalued at current levels.
- The 10-Year Treasury yield is 2.05%.
- The earnings yield stands at 5.83%.
In conclusion, we are maintaining our near term “neutral/positive” outlook for the major equity indexes given the current state of the charts and data..