Data Remains Neutral
NASDAQ internals were mixed. Once again, no major technical events of import were generated on the charts. However, the late day action was a bit disturbing. The data remains essentially neutral across the board. As yet, we have not seen enough of a shift to alter our near term “neutral/positive” outlook for the major equity indexes. However, yesterday’s closing activity may imply greater difficulty in progress.
On the charts, the indexes closed mixed with negative internals on the NYSE while the NASDAQ had negative breadth but positive up/down volume that is somewhat cautionary.
- The SPX (page 2), COMPQX (page 3) and, NDX (page 3) closed higher with the rest posting losses.
- We find the action a bit troublesome as selling appeared late in the day with sufficient power to push most of the indexes back to their intraday lows, giving up all or most of their respectable gains achieved earlier in the session.
- Chart advances on negative breadth are also less than desirable.
- Nonetheless, no support levels or trends were violated leaving the SPX, DJI, COMPQX and NDX positive with the rest neutral.
- The cumulative advance/decline lines remain positive on the All Exchange, NYSE and NASDAQ although the SPX, COMPQX and NDX stochastic levels are overbought.
- As mentioned yesterday, the VIX is near levels seen prior to an increase in volatility.
The data remains neutral. The 1 day McClellan OB/OS Oscillators (All Exchange:-12.86 NYSE:-16.0 NASDAQ:-9.92), Open Insider Buy/Sell Ratio (56.5) and detrended Rydex Ratio (+0.47) are all neutral. The new AAII Bear/Bull Ratio remains neutral as well with the crowd fairly evenly split at 25.67/36.67.
- Valuation is now approaching fair value with the spread between the forward p/e for the SPX based on Bloomberg forward 12 month consensus earnings estimates of $167.06 versus the “rule of 20” fair valuation at 17.0 versus 17.4. The spread has continued to narrow over the past several weeks as estimates have declined with issuers generally cutting back their projections during the recent earnings season as the SPX has risen in price. While this does not suggest the markets can’t go higher, we are now of the opinion that participation may become significantly more selective.
In conclusion, while we are maintaining our near term “neutral/positive” outlook for the major equity indexes, the issues discussed above may be suggesting some speedbumps ahead.
- SPX: 2,768/2,864
- DJI: 25,455/25,891
- Nasdaq: 7,447/7,717
- NDX: 7,153/7,400
- DJT: 10,047/10,436
- MID: 1,839/1,908
- Russell: 1,520/1,567
- VALUA: 6,045/6,226