Data Remains Mostly Neutral
The indexes closed mostly higher last Thursday with the one exception of the RTY posting a loss. Internals were mixed on the NYSE and NASDAQ as trading volumes declined from those of the previous session. Although no major technical events of import were generated on the charts, there was some deterioration to be noted. The data remains largely neutral. So as we enter the main thrust of the earnings season, we remain “neutral/positive in our near term outlook although the charts are starting to cast a few shadows.
On the charts, the only index to close lower Thursday was the RTY (page 5) as the rest posted gains. Trading volumes lightened while internals saw negative breadth but positive up/down volume on the NYSE and NASDAQ.
- A few technical events occurred casting some minor clouds.
- While the DJI (page 2) closed above near term resistance, the SPX (page 2), MID (page 4) and VALUA (page 5) made bearish stochastic crossovers. While not actionable at this point, they are worth noting.
- As well, the VALUA closed below its short term uptrend line. So we now find the MID, RTY and VALUA in neutral short term trends with the rest positive.
- There was a shift on the cumulative advance/decline lines as the NASDAQ’s turned neutral with the NYSE and All Exchange staying positive.
The data remains largely neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:-26.36 NYSE:-24.39 NASDAQ:-27.4).
- The Open Insider Buy/Sell Ratio remains neutral at 41.4 although showing a dip in buying.
- The % of SPX stocks trading above their 50 DMAs is neutral with a 69.9% reading.
- Crowd sentiment readings remain neutral with a neutral 0.71 detrened Rydex Ratio and 25.0/36.0 AAII Bear/Bull Ratio.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX now stands at $171.82, leaving the forward p/e at a 16.9 multiple while the “rule of twenty” finds fair value at 17.4. The narrowing of this spread over the past few weeks appears to have had some impact regarding the slowing of the pace of progress.
In conclusion, while we are maintaining our near term market outlook at “neutral/positive”, the slight deterioration on the charts as we enter a period of significant earnings announcements suggests a slightly more conservative view may be warranted.