Data Remains NeutralOpinion
The indexes closed mixed Friday with negative internals on the NYSE while NASDAQ internals were mixed. Volumes declined from the prior session on both exchanges. No technical events of import were generated on the charts while the data remains largely neutral. So while we remain concerned regarding valuation, margin debt levels and advisor complacency, we continue to be of the opinion that the neutral to positive near term trends of the indexes should be respected until proven otherwise.
- On the charts, the DJT (page 3), RTY (page 4) and MID (page 4) closed higher Friday as the rest declined. No technical events of note were generated although the DJT did manage to close back above its 50 DMA. As such, the near term uptrends for the COMPQX (page 3) and RTY remain intact as the remainder are in neutral, sideways patterns. The cumulative advance/decline lines for the All Exchange and NYSE remain positive and above their 50 DMAs while the NASDAQ A/D is neutral. We continue to respect the near term trends until the charts suggest otherwise.
- The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+26.4/+20.33 NYSE:+19.7/+27.12 NASDAQ:+33.17/+14.03). The Open Insider Buy/Sell Ratio is neutral as well at 36.7 while the Equity (0.73), Total (1.09) and OEX (0.89) Put/Call Ratios are bullish. We would also note that margin debt exposure has declined from up 19.5% y/y to up 15.9% y/y. It remains a concern.
- In conclusion, our core concerns of margin debt levels (up 15.9% y/y), historically high valuation and advisor complacency persist. However, for the near term, we believe the mix of neutral to positive near-term trends should be honored until proven otherwise.
- Forward 12-month earnings estimates for the SPX from Bloomberg of $137.23 leave a 5.56 forward earnings yield on a 17.9 forward multiple, near a decade high.
- SPX: 2,431/2,482
- DJI: 21,640/22,019
- COMPQX; 6,300/NA
- DJT: 9,118/9,422
- MID: 1,713/1,745
- RTY: 1,370/1,424
- VALUA: 5,425/5,599