Data Is Neutral/Positive
All of the indexes closed higher Friday with positive internals on the NYSE and NASDAQ as volumes declined from the prior session. While no resistance levels were violated on the charts, some of those levels were tested while some others saw moves back above their short term uptrend lines. The data is now a mixture of neutral and positive readings. As such, given the state of the data, we suspect we may see some violations of resistance over the near term, thus we are maintaining our short term positive outlook for the major equity indexes.
- On the charts, all of the indexes closed higher Friday with positive internals that now finds the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ positive with only the NASDAQ below its 50 DMA. All of the indexes closed near their intraday highs with the DJI (page 2) and VALUA (page 5) closing back above their short term uptrend lines and are now positive. The SPX (page 2) closed at resistance while the DJT (page 4) and MID (page 4) tested resistance but were unable to violate. All of the stochastic levels are neutral and suggest no overbought conditions currently exist via that indicator.
- The data is slightly encouraging as all of the McClellan OB/OS Oscillators remain neutral, suggesting possible further strength (All Exchange:+12.77/+1.33 NYSE:+22.88/+21.27 NASDAQ:+5.68/-14.16). The Open Insider Buy/Sell Ratio is neutral as well at 41.2. Some positive signals are coming from the put/call ratios with both the Equity and Total P/Cs (contrary indicators) in bullish territory at 1.04 and 0.7 while the OEX P/C finds the pros very long calls and expecting further strength at 0.6. Valuation finds consensus forward 12 month earnings estimates for the SPX at $169.07, leaving the forward 12 month p/e for the SPX at 16.9 versus the “rule of 20” implied fair value of a 17.1 multiple. The “earrings yield” stands at 5.93%.
- In conclusion, the fact that breadth has improved while resistance levels are being tested in conjunction with a lack of overbought conditions suggests it is appropriate to maintain our near term positive outlook for the major equity indexes..
- SPX: 2,790/2,851
- DJI: 25,000/26,000
- NASDAQ: 7,786/7,936
- NDX: 7,294/7,507
- DJT: 10,925/11,254
- MID: 1,966/2,008
- Russell: 1,654/1,712
- VALUA: 6,394/6,493
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