Data Mostly Neutral
Opinion: All of the indexes closed higher Friday with positive internals as volumes declined from the prior session. Multiple new closing highs were achieved on the charts as some broke to the upside from their prior sideways trading patterns. As the charts improved, the bulk of the data continues to send a neutral message at this point. As such, we are maintaining our near term “neutral/positive” outlook for the major equity indexes. However, the fact that the forward valuation of the SPX remaining near historically high levels causes our intermediate term view to remain “neutral”.
· On the charts, all of the indexes closed higher Friday with positive internals. The SPX (page 2), DJI (page 2) and COMPQX (page 3) all made new closing highs while the MID (page 4) and VALUA (page 5) both closed above resistance to new closing highs as they finally resolved to the upside from their prior sideways trends. The DJT (page 3) closed above resistance as well but was unable to achieve a new high while the RUT (page 4) remains in its “rectangle pattern” of consolidation. We would also note the NASDAQ A/D has turned positive from its prior neutral trend. As such, the bulk of the charts are now positive.
· The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+24.73/+28.06 NYSE:+40.93/+47.28 NASDAQ:+31.98/+10.14). The Gambill Insider Buy/Sell Ratio is a neutral 10.0 while the new AAII Bear/Bull Ratio (contrary indicator) as of 2/9 is a neutral 27.65/35.8. Both the Equity and OEX Put/Call Ratios are mildly bullish at 0.7 and 0.91 respectively. So the data is not posing any major concerns at this point in time.
· In conclusion, we are maintaining our near term “neutral/positive” outlook for the major equity indexes based on the current state of the charts and data. However, the 17.4 forward multiple for the SPX at a historic high based on forward 12 month IBES earnings estimates for the index implies stocks are nit cheap. Thus our intermediate term view remains “neutral”.
· Forward 12 month earnings estimates for the SPX from IBES of $132.70 leave a 5.75 forward earnings yield on a 17.4 forward multiple, near a 12 year high.
SPX: 2,277/NA
DJI: 19,946/NA
COMPQX; 5,576/NA
DJT: 9,141/9,435
MID: 1,659/1,710
RTY: 1,356/1,357
VALUA: 5,290/5,419