Data Mostly Neutral
All of the major equity indexes closed higher Monday with positive internals on the NYSE and NASDAQ as overall trading volumes rose from the prior session. The majority of the indexes closed above their near term resistance levels. Several also closed above their short term downtrend lines. Improvement was seen in the cumulative advance/decline lines as well. The data remains generally neutral with some improvement in the psychology data. Given the improvements noted above, we are required to shift our near term outlook for the major equity markets back to “neutral” from “neutral/negative”. In most cases, we are back where we were one weak ago.
On the charts, all if the indexes closed higher Monday with positive internals on higher trading volume.
- All of the indexes, with the exceptions of the DJT (page 4) and RTY (page 5), closed above their near term resistance levels.
- As well, all but the RTY and VALUA (page 5) were able to rise back above their short term downtrend lines. In essence, we are back to where last Tuesday.
- Only the RTY and VALUA remain in short term downtrends as the rest are now neutral.
- Market breadth has improved as well with the NYSE and NASDAQ cumulative advance/decline lines turning positive. The VALUA A/D is neutral.
- High “volume at price” (VAP) levels are supportive on the DJI (page 2) and NDX (page 3). They are resistance on the rest of the indexes suggesting the potential for some stalling of progress fir those in that condition.
- We would also note that during the recent downdraft, the SPX (page 2), DJI, COMPQX (page 3) and NDX bounced off of their intermediate term uptrend lines as the rest saw temporary violations. So the intermediate trends remain intact.
The data is largely neutral including all of the 1-day McClellan OB/OS Oscillators (All Exchange:+22.25 NYSE:+24.3 NASDAQ:24.0). The OB/OS have not moved to overbought at this stage.
- The detrended Rydex Ratio (contrary indicator) remains neutral at -0.47 as is the % of SPX stocks trading above their 50 DMAs at 42.8.
- The new AAII Bear/Bull Ratio (contrary indicators) has actually turned bullish as the crowd now finds bears outnumbering bulls 38.6/27.33.
- The Open Insider Buy/Sell Ratio remains neutral at 83.0.
- Valuation continues to appear appealing with the 12-month forward consensus earnings estimate from Bloomberg for the SPX at $172.16, leaving the forward p/e at a 17.0 multiple while the “rule of twenty” finds fair value at 18.4.
- The 10-Year Treasury yield is 1.6%.
- The earnings yield stands at 5.89%.
In conclusion, the whipsaw action on the indexes over the past week has shifted the chart trends and data back to levels requiring us to revise our near term outlook to “neutral” from “neutral/negative”. Current VAP levels, however, suggest some further short term progress may more hard won from this point.