Data Remains Largely NeutralOpinion
All of the indexes closed higher Wednesday with positive internals on the NYSE and NASDAQ as volumes declined from the prior session on both exchanges. Some of the indexes managed to close above resistance on the charts with one making a new closing high. The data is now mixed but generally neutral in projections. As such, we remain “neutral/positive” in our near term outlook for the major equity indexes with the caveat that stochastic levels remain overbought suggesting a possible pause or partial retracement of recent gains.
- On the charts, all of the indexes posted gains yesterday with positive internals on lighter trading volume. The MID (page 4), RTY (page 5) and VALUA (page 5) managed to close above their near term resistance levels with the RTY actually making a new closing high. So we find all of the indexes still in short term uptrends with the exceptions of the DJI (page 2) and DJT (page 4) are in neutral sideways patterns. The cumulative advance decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs. However, the stochastic levels discussed over the past few comments remain overbought. While they may stay in that condition for extended periods, they do imply some degree of risk present that may result in a pause or partial retracement of the recent rally should bearish crossovers be triggered.
- The data is now a bit mixed. All of the McClellan OB/OS Oscillators are neutral (All Exchange:+37.87/+12.35 NYSE:+33.85/+16.02 NASDAQ:+44.67/+10.75) as are the OpenInsider Buy/sell Ratio (36.4) and new Investors Intelligence Bear/bull Ratio (20.5/43.1). The Equity Put/Call Ratio is a bearish 0.5 that is counterbalanced by a mildly bullish OEX P/C (0.93) and Total P/C (0.89). Valuation finds the forward 12 month P/E for the SPX based on forward 12 month consensus earnings estimates from Bloomberg of $162.86 at a 16.7 multiple versus the “rule of 20” implied fair value of 16.9, implying the markets are close to being fairly valued at current levels.
- In conclusion, we are maintaining our near term “neutral/positive” outlook for the major equity indexes with the caveat that some expectation for a possible pause or retracement of some of the recent gains continues to exist as a result of elevated stochastic levels..
- SPX: 2,671/2,741
- DJI: 24,357/24,963
- NASDAQ: 7,140/7,415
- NDX: 6,769/7,017
- DJT: 10,416/10,767
- MID: 1,901/1,950
- Russell: 1,579/NA
- VALUA: 6,124/6,288