No Technical Events RegisteredData Remains Neutral
The bulk of the indexes closed lower Monday with the one exception of the NDX posting a fractional gain. Internals were negative on the NYSE and NASDAQ as volumes dropped on both exchanges from the prior session. No technical events of import were generated while that data continues to send a generally neutral message. However, several charts are now approaching their October breakdown levels, when combined with the narrowing of the valuation spread, that may present a near term barrier. Nonetheless, given the state of the charts and data, they suggest we maintain our near term “neutral/positive” outlook for the major equity indexes at this time.
On the charts, all of the indexes closed lower yesterday except the NDX (page 3) posting a minor gain. Internals were negative on lighter trading volumes.
- No important technical events were generated although the COMPQX (page 3), DJI (page 2), NDX and SPX (page 2) are at their October breakdown points that may cause some resistance.
- All remain in near term uptrends with the exception of the RTY (page 5) being neutral.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive as well.
- The VIX may be something to watch as it is near bottoming levels seen throughout the last twelve months that portended an increase in volatility. However, while that occurred from July through September, the indexes managed to progress.
The data remains largely neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:-1.24 NYSE:+9.11 NASDAQ:-9.25). The fact that they are not overbought given the recent rally is a positive, in our opinion.
- The Open Insider Buy/Sell Ratio remains neutral at 64.9 with the % of SPX stocks trading above their 50 DMAs at neutral with a 79.6% reading.
- Crowd sentiment readings remain neutral with a neutral 0.71 detrened Rydex Ratio and new 25.0/36.0 AAII Bear/Bull Ratio. We reiterate we have found that excessive enthusiasm displayed in these two indicators tend to be prescient signals prior to market contractions. That has yet to occur.
- The 12 month forward consensus earnings estimates from Bloomberg for the SPX now stands at $171.65, leaving the forward p/e at a 17.0 multiple while the “rule of twenty” finds fair value at 17.5 The narrowing of this spread may have the potential to slow the pace of progress.
In conclusion, we are maintaining our near term market outlook at “neutral/positive” as no evidence has surfaced at this point to cause a change in our opinion.