Data Remains Largely Neutral
All of the indexes closed higher Wednesday with positive internals as volumes rose from the prior session on the NSYE and declined on the NASDAQ. No major technical events were generated on the charts, leaving the current trends intact. The data continues to send a generally neutral message. As such, nothing occurred to alter our current near term “neutral/positive” outlook for the major equity indexes.
On the charts, all of the indexes closed higher yesterday with positive internals.
- No resistance or trend lines were violated, leaving all in near term uptrends with the exception of the RTY (page 5) that is neutral.
- The DJI (page 2) did flash a “bearish crossover signal”, but as it remains in an uptrend, is not yet actionable.
- The All Exchange, NTYSE and NASDAQ cumulative advance/decline lines remain positive and above their 50 DMAs.
The data is largely neutral including all of the 1 day McClellan OB/OS Oscillators (All Exchange:+19.65 NYSE:+20.57 NASDAQ:+20.69).
- The Open Insider Buy/Sell Ratio remains neutral at 56.2 with the % of SPX stocks trading above their 50 DMAs back at neutral with a 78.8% reading.
- Crowd sentiment readings remain neutral in spite of the fact that the DJI has rallied over 4,500 points from its December low. They remain remarkably under enthusiastic with a neutral 0.62 detrened Rydex Ratio and new 26.0/35.0 AAII Bear/Bull Ratio.
- We reiterate we have found that excessive enthusiasm displayed in these two indicators tend to be prescient signals prior to market contractions. That is not the case currently.
- The OEX Put/Call Ratio is one cautionary indicator as the pros are loaded to the eyeballs in puts at 5.32. Yet this data point’s forecasting ability has deteriorated over the past several months and, as such, is no longer considered prescient.
- The 12 month forward consensus earnings estimates from Bloomberg for the SPX stands at $172.02, leaving the forward p/e at a 16.8 multiple while the “rule of twenty” finds fair value at 17.5 As such, the SPX continues to appear to be slightly undervalued.
In conclusion, we are maintaining our near term market outlook at “neutral/positive” given the state of the charts and data. However, as we approach prior highs, we suspect progress may moderate within a more selective group of participants.