Indexes Close Mixed

Data Remains Bullish

The indexes closed mixed Monday as half posted gains while the other half declined. Internals were positive on the NYSE and mixed on the NASDAQ as volumes dropped from those of the prior session on both exchanges. While no major technical events were registered on the charts, one encouraging sign did appear. Meanwhile, the data remains bullish and suggests further upside potential over the near term. As such we are maintaining our near term “neutral/positive” outlook for the major equity indexes.

• On the charts, the DJT (page 4), MID (page 4), RTY (page 5) and VALUA (page 5) closed higher on the day as the rest posted minor losses. Internals were positive on the NYSE while the NASDAQ saw positive breadth but negative up/down volume as the FANG stocks that carried the prior market rally saw more distribution. No support or resistance levels were violated as the cumulative advance/decline lines, although seeing an uptick, remain in downtrends. However, the NDX (page 3) did flash a bullish stochastic crossover signal while the rest of the stochastic levels remain oversold. Their current condition offers some degree of encouragement, in our opinion. We would also note the % of SPX stocks above their 50 DMAs remains very depressed at 14.5% that is a level coincident with the market lows seen in January and April of this year.

• The data remains largely bullish. All of the McClellan OB/OS Oscillators remain oversold (All Exchange:-78.1/-85.69 NYSE:-79.2/-83.2 NASDAQ:-79.09/-90.05). The Total Put/Call Ratio (contrary indicator) finds the crowd remains weighted in puts at 0.96 while insiders continue to scoop up stock with a 133 Open Insider Buy/Sell Ratio (page 9). That is the most bullish reading for this indicator since 9/2015 and 1/2016, both of which were achieved at market lows. We have seen this dynamic many times over the years that when the crowd is jumping off the cliff, insiders are standing there with a basket to catch depressed stock prices when they see no significant headwinds over the intermediate term. Finally, we continue to find valuation below implied fair value with the forward 12 month earnings estimates for the SPX via Bloomberg at $172.29 leaving the forward 12-month p/e for the SPX at 16.0 versus the “rule of 20” implied fair value of a 16.8 multiple. The “earnings yield” stands at 6.26%.

• In conclusion, while resistance levels have yet to be violated and an improvement in market breadth has yet to occur, the current state of the charts and data suggest we maintain our near term “neutral/positive” outlook for the major equity indexes.
• SPX: 2,710/2,795
• DJI: 24,874/25,872
• NASDAQ: 7,267//7,600
• NDX: 6,947/7,160
• DJT: 10,355/10,719
• MID: 1,858/1,908
• Russell: 1,540/1,640
• VALUA: 6,027/6,216