Data Remains Mostly Neutral
All of the indexes closed higher Wednesday with positive internals on the NYSE and NASDAQ as volumes declined on both exchanges from the prior session. The charts saw the DJI close above resistance, putting all of the indexes in near term uptrends. The data remains mostly neutral. As such, we are maintaining our near term “positive” outlook for the major equity indexes at this time.
- On the charts, all of the indexes closed higher yesterday with positive internals on lighter volume. The DJI (page 2) managed to close above resistance shifting its near term trend to positive from neutral. Thus we find all of the eight indexes in technical near term uptrends. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain in uptrends as well. While the markets have had a major run from the beginning of the year, we do not see any notable “sell signals” on the charts at this point.
- The data remains largely neutral. While the 1 day McClellan OB/OS Oscillators continue to be overbought (All Exchange:+60.87/+98.82 NYSE:+63.0/+119.54 NASDAQ:+61.14/+83.73) the Open Insider Buy/Sell Ratio (28.1), detrended Rydex Ratio (-0.07) and recent AAII Bear/Bull Ratio (28.33/35.67) are neutral. At his stage, even with the size of the rally, the Rydex Ratio and AAII Bear/Bull Ratio show a lack of excessive optimism that would be problematic.. Valuation continues to appear to be appealing as it remains below fair value, with the forward 12 month earnings estimates for the SPX via Bloomberg at $168.04, leaving the forward 12 month p/e for the SPX at 16.4 versus the “rule of 20” implied fair value of a 17.3 multiple. The “earnings yield” stands at 6.1%.
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- In conclusion, with all of the charts are in short term uptrends and lacking sell signals, internal breadth positive while investor sentiment is not at levels suggestive of too much optimism and valuation continues to appear appealing, we maintaining our near term “positive” outlook for the major equity indexes.
- SPX: 2,682/2,760
- DJI: 24,890/25,767
- Nasdaq: 7,209/7439
- NDX: 6,845/7,110
- DJT: 10,052/10,521
- MID: 1,838/1,895
- Russell: 1,484/1,550
- VALUA: 5,974/6,129