Data Mostly Neutral
All of the indexes closed higher Tuesday with positive internals on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. Several new closing highs were achieved on the charts as most remain in short term uptrends. However, even with the data primarily neutral, we now believe some pause in the recent rally is likely. Yet this is not enough to alter our current near term “positive” outlook for the major equity indexes.
- On the charts, all of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ. The DJT (page 4) and RTY (page 5) managed to close above near term resistance to new closing highs while the MID (page 4) and VALUA (page 5) made new closing highs as well. Regarding short term trends, only the COMPQX (page 3) and NDX (page 3) are neutral with the rest positive. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are positive and above their 50 DMAs. However, we think some tempering of the recent index gains may be forthcoming, in part from the fact that the stochastic levels are now overbought only with the exceptions of the COMPQX and NDX that have lagged in this rally.
- The data is largely neutral. However, another pause signal is coming from the NYSE 1 day McClellan OB/OS that is now overbought. The rest are still neutral (All Exchange:+49.36/+23.85 NYSE:+56.14/+47.26 NASDAQ:+47.12/+6.52). The Equity Put/Call Ratio (0.58), Total P/’C (0.81), OEX P/C (1.14) and Open Insider Buy/Sell Ratio (35.3) are all neutral as well. Valuation finds consensus forward 12 month earnings estimates for the SPX at $169.02, leaving the forward 12 month p/e for the SPX at 16.9 versus the “rule of 20” implied fair value of a 17.2 multiple. The “earrings yield” stands at 5.9%.
- In conclusion, while we remain “positive” in our near term outlook for the major equity indexes based on the evidence presented by the charts and data, the NYSE 1-day OB/OS and stochastic readings suggest we may experience some pause in the rally over the near term.
- SPX: 2,869/2,873
- DJI: 25,000/26,052
- NASDAQ: 7,786/7,936
- NDX: 7,294/7,507
- DJT: 11,114/NA
- MID: 2,000/NA
- Russell: 1,672/1,712
- VALUA: 6,455/NA