Data Little Changed
The major equity indexes closed higher Thursday with positive internals on the NYSE and NASDAQ as NYSE volumes rose and NASDAQ volumes dipped from the previous session. No technical events of import were generated on the charts although several did see successful tests of their near-term support levels. Breadth improved enough to shift the cumulative advance/decline lines to neutral from positive. Meanwhile the data dashboard is little changed with mostly neutral readings except for investor psychology and valuation that keep our near-term outlook for the equity markets at “neutral” currently.
On the charts, all the major equity indexes closed higher Thursday with positive internals.
- While no violations of resistance or trend were registered, the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (p-age 3) all saw successful tests of their near-term support levels and closed near their intraday highs. However, they have been making a series of lower intraday highs from their 10/12 peaks.
- As such, all remain in near-term neutral trends except for the DJT (page 4) and VALUA (page 5) remaining bullish.
- Breadth improved slightly that was sufficient to shift the cumulative advance/decline lines for the All Exchange, NSYE and NASDAQ from negative to neutral.
- All the index charts remain on bearish stochastic crossover signals.
The data is little changed.
- The 1-day McClellan OB/OS Oscillators remain neutral (All Exchange: -1.49 NYSE: +0.94 NASDAQ: -3.82).
- Psychology continues to be of some concern, in our opinion, as the Open Insider Buy/Sell Ratio (page 9) lifted to a neutral 39.8 while the Rydex Ratio (contrarian indicator) remains bearish with the leveraged ETF traders extended in their leveraged long exposure at a bearish 1.12 and this week’s Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) remaining bearish at 21.2/56.6.
- We continue to monitor the high levels of bullish opinions on the part of investment advisors and leveraged ETF traders as potential cautionary signals as they leave little room for disappointment on their part, in our view.
- The valuation gap remains extended with the SPX forward multiple at 22.2 with consensus forward 12-month earnings estimates from Bloomberg dropping over the past few sessions to $155.76 while the “rule of 20” finds fair value at 19.2. Said valuation extension has been present for the past several months.
- The SPX forward earnings yield is 4.54% with the 10-year Treasury yield rose further to 0.85%.
In conclusion, we have yet to see enough evidence presented to alter our current near-term “neutral” outlook for the equity markets.
SPX: HVS3,419/3,586 DJI: HVS28,216/29,148 COMPQX: HVS11,367/12,065
NDX: HVS11,563/12,1962 DJT: 11,403/NA MID: 1,908/HVR2,007
RTY: HVS1,600/1,650 VALUA: HVS6,4325/HVR6,747