Insiders Back Off On Buying
The indexes closed mixed Friday with negative internals on the NYSE while those of the NASDAQ were mixed. Volumes declined on both exchanges from the prior session. All saw rallies off of their intraday lows to close near the upper end of their intraday ranges. No major technical events occurred on the charts although some saw bearish stochastic crossover signals generated. The data is largely neutral with a few sending some cautionary signals. As such, we feel it appropriate to maintain our opinion that some near term consolidation of recent gains may be more likely within our near term “positive” outlook for the major equity indexes.
- On the charts, the SPX (page 2), COMPQX (page 3) and NDX (page 3) closed higher Friday as the rest of the indexes posted losses. We would note that the indexes that gained did so on negative breadth. No support levels were violated leaving all in near term sideways patterns with the exceptions of the NDX and DJT (page 4) in uptrends. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive. However, while not actionable at this point, the SPX, COMPQX, NDX and VALUA (page 5) gave “bearish stochastic crossover signals” suggesting a need to remain alert for some possible weakness forthcoming.
- The data is mostly neutral including the 1 day McClellan OB/OS Oscillators (All Exchnage:18.16/+67.93 NYSE:+15.15/+89.16 NASDAQ:+22.88/+51.99). The OEX Put/Call Ratio shows the pros neutral as well at 1.29. We would note the Open Insider Buy/Sell Ratio (page 9), while still in neutral territory, finds the insiders pulling back significantly on their buying activity to 29.2 while the % of SPX stocks trading above their 50 DMAs is a cautionary 78.2 (page 9). Valuation, however, still seems to be appealing as it remains below fair value, with the forward 12 month earnings estimates for the SPX via Bloomberg at $168.16, leaving the forward 12 month p/e for the SPX at 16.1 versus the “rule of 20” implied fair value of a 17.4 multiple. The “earnings yield” stands at 6.21%.
- In conclusion, the charts and data continue to suggest the potential for some further consolidation of the recent rally in the markets while we maintain our broader near term outlook as “positive”.
- SPX: 2,670/2,738
- DJI: 24,732/25,468
- Nasdaq: 7,166/7423
- NDX: 6,776/7,110
- DJT: 9,836/10,250
- MID: 1,806/1,867
- Russell: 1,462/1,532
- VALUA: 5,905/6,129