Data Mixed
All of the indexes closed higher Tuesday with positive internals on the NYSE and NASDAQ as volumes declined below those of the prior session. One of the index charts closed above resistance while two others tested but failed. All of the charts remain in short term uptrends. The data is more mixed with two points worthy of discussion below. With that said, we have yet to see a sufficient shift in the weight of the evidence to alter our current near term “positive” outlook for the major equity indexes.
- On the charts, all of the indexes closed higher yesterday with positive internals. All of the near term uptrends remain intact. The VALUA (page 5) managed to close above near term resistance while the COMPQX (page 3), DJT (page 4) and MID (page 4) challenged resistance but failed to violate. The cumulative advance/decline lines remain positive as well for the All Exchange, NYSE and NASDAQ. So in spite of the massive up moves experienced since the beginning of the year, we have yet to see important cautionary signals appear on the charts.
- The data is a bit more mixed. All of the McClellan OB/OS Oscillators are overbought (All Exchange:+76.05/+96.54 NYSE:+79.48/+118.66 NASDAQ:+74.75/+78.81. While not actionable, the Open Insider Buy/Sell Ratio has now slipped into bearish territory at 22.2 (page 9) as insiders have all but stopped their buying that was so aggressive in January. However, we do not view this metric as a viable “timing tool” for market corrections. Also, we have seen the spread between current SPX valuation versus “fair value” shrink from over 200 basis points to 80 over the past few weeks as the SPX has risen while forward 12 month estimates for the SPX from Bloomberg have declined to $167.76 from $171.00 a few weeks ago. Yet it does remain “undervalued” at a forward 12 month p/e of 16.6 versus the “rule of 20” implied fair value of a 17.4 multiple. The earnings yield stands at 6.03%. Counterbalancing is the lack of investor exuberance as the new AAII Bear/Bull Ratio remains neutral at 26.0/35.0 as is the detrended Rydex Ratio at -0.35.
- In conclusion, while there are a few issues as discussed worth monitoring, the state of the charts and data continue to suggest we maintain our near term “positive” outlook for the major equity indexes at this point in time..
- SPX: 2,723/2,796
- DJI: 25,290/25,882
- Nasdaq: 7,236/7,501
- NDX: 6,845/7,110
- DJT: 10,298/10,675
- MID: 1,864/1,917
- Russell: 1,509/1,587
- VALUA: 6,097/6,330