Data Mostly Neutral
Opinion
All of the indexes closed lower Tuesday with negative internals on the NYSE and NASDAQ as volumes rose on both exchanges from the prior session. No support levels or trends were violated on the charts although the stochastic levels gave two more cautionary signals. The data is largely neutral, yielding no high probability projections. As such, while some concerns remain, we have yet to see enough evidence to alter our current near term “neutral” outlook for the major equity indexes.
- On the charts, all of the indexes closed lower yesterday with negative internals and higher trading volume. However, the morning showed the worst point of the session as most managed to close near their intraday trading highs. No technical support levels or short term trends were violated, leaving the SPX (page 2) and DJI (page 2) neutral with the rest positive. Yet two more notes of caution were registered as the SPX and DJT (page 4) both gave “bearish stochastic crossover” signals. The DJI, we would note, closed very near support. Any degree of further weakness could result in a break of said support. There was some shift in the cumulative advance/decline lines as the All Exchange and NYSE’s are now neutral but above their 50 DMAs. The NASDAQ A/D remains positive.
- The data is largely neutral. In spite of the declines, all of the McClellan OB/OS Oscillators are neutral (All Exchange:+38.04/-15.12 NYSE:+49.24/-17.36 NASDAQ:+33.55/-10.2). The Equity P/C (0.59) and Total P/C (0.84) are also neutral while the OEX P/C (0.88) and Rydex Ratio (1.55) are counterbalancing with bullish and bearish signals respectively. The OpenInsider Buy/Sell Ratio remains neutral at 29.7 but shows no sign yet of a shift from their selling tendency of late. Sentiment, discussed yesterday, remains a concern as it suggests complacency is dominating opinion. Valuation finds the SPX near fair valuation based on the forward 12 month consensus earnings estimates from Bloomberg of $163.26 at a 16.9 multiple versus the “rule of 20” implied fair value of 17.1.
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- In conclusion, we are maintaining our near term “neutral” outlook for the major equity indexes due to the current state of the charts and data. However, some of the indexes continue to appear extended and possibly subject to vulnerability should we see a resumption of supply entering the markets.
- SPX: 2,736/2,784
- DJI: 24,665/25,337
- NASDAQ; 7,418/NA
- NDX: 6,943/NA
- DJT: 10,832/11,218
- MID: 1,950/NA
- MID: 1,628/NA
- VALUA: 6,291/NA