Data Primarily Neutral
Opinion: The indexes closed mostly higher Friday with positive internals on both the NYSE and NASDAQ as volumes declined form the prior session. Two new closing highs were achieved on the charts where all of the near term uptrend lines remain intact. The data is a mixed bag, leaving its message fairly neutral for the near term, in our opinion. Thus we remain of the opinion that although market valuation is at levels not seen in over a decade, the charts and data suggest the near term uptrends should continue to be respected until proven otherwise.
- On the charts, the only index to close lower Friday was the DJT (page 3). All others advanced with both the RTY (page 4) and VALUA (page 5) establishing new closing highs. Internals were positive as volumes declined. All of the near term uptrends for the indexes remain intact as do the uptrends of the cumulative advance/decline lines that remain above their 50 DMAs as well. As such, at this stage we do not see any actionable near term sell signals presently that would cause a shift away from respecting the near term uptrends.
- The data is mixed and, in our opinion, resulting in a rather neutral message. The McClellan OB/OS Oscillators find the 1 day levels neutral on the All Exchange and NYSE while the NASDAQ is slightly overbought (All Exchange:+42.91/+78.05 NYSE:+35.85/+84.45 NASDAQ:+52.15/+76.51). All of the 21 day readings are overbought. Yet all of the Put/Call Ratios are on bullish signals (Total:0.98 Equity:0.77 OEX:0.59) while the Open Insider Buy/Sell Ratio remains neutral at 35.5.
- In conclusion, while the forward valuation of the SPX based on forward 12 month earnings estimates remains over a decade high at an 18.2 multiple, the combination of the short term trends, advance/decline lines and generally neutral message from the data suggest said near term trends should continue to be respected until proven otherwise.
- Forward 12 month earnings estimates for the SPX from Bloomberg of $137.37 leave a 5.56 forward earnings yield on a 18.2 forward multiple, over a decade high.
SPX: 2,475/NA
DJI: 22,047/NA
NASDAQ: 6,361/6,461
DJT: 9,382/9,710
MID: 1,740/1,781
RTY: 1,414/NA
VALUA: 5,589/NA