Opinion: Friday was a fairly uneventful day in spite of the SPX making a marginal new closing high. NYSE internals were positive while mixed on the NASDAQ as that exchange saw a decrease in volume. The majority of the data is neutral while several indexes are now overbought on their stochastic levels. As such, we remain short term neutral while valuation remains a concern for the intermediate term.
- On the charts, no major events took place on Friday with the exception of the SPX (page 2) making a new marginal closing high. The NASDAQ(page 3) and RUT (page 4) closed lower as the others advanced. We are of the opinion that none of the action was technically meaningful and thus remain neutral for our short term outlook based on the charts. We would note the stochastic levels for the SPX, DJI (page 2), COMPQX and MID (page 4) are now overbought.
- The data is almost completely neutral including the McClellan OB//OS Oscillators (NYSE:+19.67/+1.31 NASDAQ:+14.06/-17.81. As such, they add to the “neutral” near term prospects for the major indexes.
- In our opinion, the 17.1X forward 12 month earnings estimates from First Call for the SPX, which remains at a decade high valuation, continues to be a concern for the more intermediate term outlook.
- For the longer term, we remain bullish on equities as they remain comparatively undervalued with a 5.85% forward earnings yield for the SPX based on 12 month IBES forward earnings estimates of $124.28 versus the U.S. 10-Year Treasury yield of 2.14%.
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SPX: 2,095/???
DJI: 18,041/???
COMPQX; 4,978/5,073
DJT: 8,541/8,802
MID: 1,495/1,534
RUT: 1,206/1,252