Near term outlook remains “Neutral”
Opinion: The indexes closed mixed Friday with mixed internals as volumes rose on the NYSE and declined on the NASADQ from their prior session. A couple of the charts closed below their short term uptrend lines as had been speculated in our recent reports. The data is largely unavailable this morning, leaving the charts as our mostly singular guide. As such, our near term outlook remains “neutral” given the nearly vertical trajectory of the short term uptrend lines combined with the magnitude of the recent gains, both of which suggest at least a period of consolidation. The forward p/e for the SPX near historic highs keeps us “neutral” for the intermediate term as well.
- On the charts, the indexes closed mixed with mixed internals on Friday. While advancers outweighed decliners on the NYSE and NASDAQ, selling volume was greater than buying volume suggesting a dampening of demand. The SPX (page 2), DJT, (page 3) and MID (page 4) closed lower on the day with the rest posting modest gains. Of note, the SPX and COMPQX (page 3) both closed below their short term uptrend lines while the DJT (page 3) that had tested its long term downtrend line failed to violate once again. Given that all of the stochastic levels remain overbought, the action of the charts suggests the higher probability over the near term is some sideways consolidation. While potential for some downside exists, given the size of the recent rally, it is too early to make that call until more evidence supports that projection.
- The data is mostly unavailable this morning with the exception of the WST Ratio and its Composite that are both bullish at 17.7 and 88.1 respectively. However, recent readings of the data dashboard have had a rather cautionary tone overall.
- In conclusion, we remain near term “neutral” in our outlook for the major indexes for reasons stated above. The forward p/e for the SPX near historic highs suggests the markets are not cheap and keeps us “neutral’ for the intermediate term as well.
- Forward 12 month earnings estimates for the SPX from IBES of $126.66 leave a 5.85% forward earnings yield on a 17.1 forward multiple.
SPX: 2,080/NA
DJI: 17,722/NA
COMPQX; 4,971/5,054
DJT: 7,685/8,104
MID: 1,489/1,547
RUT: 1,158/1,224
VALUA: 4,692/4,895