Data Remains Mixed
The indexes closed mixed Monday with positive internals on the NYSE and NASDAQ as NYSE volumes rose and NASDAQ volumes declined from the prior session. The only technical chart events of note were the SPX closing below its short term uptrend line, turning said trend to neutral from positive while the VALUA closed above resistance. The data remains mixed in its market probabilities. As such, we are maintaining our near term “neutral” outlook for the major equity indexes.
On the charts, the indexes closed mixed Monday with positive internals.
The MID (page 4), RTY (page 5) and VALUA (page 5) closed higher as the rest declined.
The only technical events of import was the SPX (page 2) closing below its short term uptrend line turning said trend to neutral from positive while the VALU (page 5) closed above near term resistance.
The rest of the indexes are in near term uptrends as are the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ.
High “volume at price” (VAP) levels remain supportive.
However, we reiterate that the stochastic levels remain overbought, suggesting some potential for some market weakness. Moving form overbought to oversold is a regular phenomenon. The question is “When will the signals present themselves?”. As yet, they have not.
The data remains mixed.
All of the 1-day McClellan OB/OS Oscillators remain mostly overbought with the exception of the DJI turning neutral (All Exchange:+60.48 NYSE:+45.14 NASDAQ:+73.98). Like the stochastic readings, they imply an increase in retracement potential.
The detrended Rydex Ratio (contrary indicator) is neutral at +0.2 as is the % of SPX stocks trading above their 50 DMAs at 67.7.
The new AAII Bear/Bull Ratio (contrary indicators) remains bullish at 37.33/29.0.
The Investor’s Intelligence Bear/Bull Ratio (contrary indicator) remains neutral at 17.9/50.0.
The Open Insider Buy/Sell Ratio remains neutral at 36.5 but has been declining over the past week.
The appearance of valuation looking appealing, assuming current estimates hold, has compressed with the 12-month forward consensus earnings estimate from Bloomberg for the SPX at $171.45, leaving the forward p/e at a 17.5 multiple while the “rule of twenty” finds fair value at 18.2. We would note said earnings estimates have been declining over the past two weeks from $172.25 as the markets have moved higher.
The 10-Year Treasury yield stands at 1.84%.
The earnings yield is 5.72%.
In conclusion, we have yet to see enough of a shift in the weight of the evidence to alter our near term “neutral” outlook for the major equity indexes at this time.