All of the indexes closed lower Friday with negative internals on the NYSE and NASDAQ as all closed near their lows of the day and some 50-DMAs being violated. No support levels were broken but volumes rose from the prior session as signs of distribution seem to be appearing. The data remains mostly neutral. While our sense of caution is starting to be rekindled, the chars and data have not shifted enough at this stage by our work to warrant a change in our near-term “neutral” outlook for the major equity indexes.
On the charts, all of the indexes posted losses Friday with negative internals on higher volume.
- No support levels were violated but the SPX (page 2), COMPQX (page 3), NDX (page 3) and DJT (page 4) closed back below their 50 DMAs that they had recouped in the prior session.
- So all of the indexes are below their 50 DMAs with all in neutral trends with the one exception of the DJI’s remaining negative.
- The cumulative advance/decline lines have shifted a bit with the All Exchange and NASDAQ back to neutral while the NASDAQ’s has closed below its 50 DMA.
- The NYSE A/D remains positive and above its 50 DMA.
The data remains neutral including the 1-day McClellan OB/OS Oscillators (All Exchange:-36.55 NYSE:-37.0 NASDAQ:-39.32).
- The detrended Rydex Ratio (-0.09), Open Insider Buy/Sell Ratio (64.3) and % of SPX stocks above their 50 DMAs (46.7) are all neutral as well.
- Sentiment still remains mostly cautionary with the AAII Berar/Bull Ratio showing the crowd slightly overly bullish at 21.33/38.33 while the Investors Intelligence Bear/Bull Ratio (contrary vindicator) negative at 17.8/55.5 as of last Tuesday’s weekly readings.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX stands at $171.53, leaving the forward p/e at a 16.7 multiple while the “rule of twenty” finds fair value at 17.6, easing our prior valuation concerns when the SPX was trading at fair value a few weeks ago. The earnings yield stands at 6.0%.
In conclusion, Friday’s late day selling was not sufficient to warrant a shift in our near term “neutral” outlook for the major equity indexes at this stage as the data remains neutral. However, some signs of distribution seem to be appearing, thus causing us to raise our cautionary antennas should more clouds begin to gather.