Cumulative A/Ds Turn PositiveOpinion
All of the indexes closed higher Monday with positive internals on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. Some minor improvements were seen on the charts but all remain in near term neutral patterns. The data remains largely neutral as well. So while we are encouraged by the recent action, there is not yet enough evidence to cause a shift from our current near term “neutral/positive” outlook for the major equity indexes.
- On the charts, all of the indexes closed higher yesterday with broadly positive internals on higher volume. The bulk closed near their intraday trading highs. Some minor chart events occurred with both the COMPQX (page 3) and RTY (page 5) testing their near term resistance levels. However, neither was able to breach said resistance on the close. We also saw the RTY to be the first index to close above its 50 DMA since mid-March. More encouragement was found with all of the cumulative advance/decline lines turning positive and back above their 50 DMAs. Yet while breadth is improving, we have yet to see any index overcome near term resistance that would turn the outlook more bullish in nature.
- The data remains largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+34.85/-23.94 NYSE:+37.49/-15.85 NASDAQ:+32.03/-31.48). The Equity Put/Call Ratio (0.57) and OpenIinsider Buy/Sell Ratio (49.1) remain neutral as well with the Total P/C (0.85) and OEX P/C (0.94) mildly bullish. The forward 12 month p/e for the SPX based on forward 12 month consensus earnings estimates is a 16.5 multiple versus fair value of 17.2 based on the “rule of 20” calculation.
- In conclusion, while recent action is encouraging, we have yet to see sufficient action on the charts to move us from our current near term “neutral/positive” outlook for the major equity indexes.