Data Remains Mixed
The indexes closed mixed Monday with positive internals on the NYSE as NASDAQ internals were negative. Volumes declined on both exchanges from those of the prior session. The charts saw one index close above short term resistance. The data has become more mixed in its message while valuation appears attractive. As such, we are maintaining our near term “neutral/positive” outlook for the major equity indexes.
- On the charts, the indexes closed mixed yesterday with positive internals on the NYSE and negative internals on the NASDAQ. The SPX (page 2), DJI (page 2), MID (page 4) and VALUA (page 5) closed higher yesterday with the MID managing to close above its short term resistance level. The NDX (page 3), COMPQX (page 3) DJT (page 4) and RTY (page 5) closed lower on the day. We now find the MID trend turning short term positive with the rest remaining neutral. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive but below their 50 DMAs.
- The data has turned more mixed. All of the 1 day McClellan OB/OS Oscillators have slipped into overbought territory (All Exchange:+52.78/-49.01 NYSE:+58.29/-35.29 NASDAQ:+50.08/-60.35) while the NASDAQ 21 day remains oversold. The % of SPX components trading above their 50 DMAs (contrary indicator) rose but remains depressed at 29.0% while insider buying has slowed to a neutral 112.1 Open Insider Buy/Sell Ratio from its prior voracious pace. The crowd (contrarian indicator) has turned more fearful with a -1.44 detrended Rydex Ratio as the leveraged ETF traders are now heavily leveraged short as bears outnumber bulls 36.67/32.67 via the new AAII Bear/Bull Ratio. Seasonality remains encouraging has the November to April period coming out of a mid-term election year has seen positive returns since 1946 with a median return of 15% since 1930. Only two out of 21 periods were negative. Valuation, assuming current estimates hold, remains below implied fair value with the forward 12 month earnings estimates for the SPX via Bloomberg dipping to $171.90, leaving the forward 12-month p/e for the SPX at 15.9 versus the “rule of 20” implied fair value of a 16.8 multiple. The “earnings yield” stands at 6.28%.
- In conclusion, while the data is suggesting we may see some slowing of progress, the current condition of the charts and data continue to suggest we maintain our near term “neutral/positive” outlook for the major equity indexes.
- SPX: 2,682/2,749
- DJI: 24,776/25,500
- NASDAQ: 7,275/7,434
- NDX: 6,892/7,079
- DJT: 10,143/10,380
- MID: 1,826/1,879
- Russell: 1,500/1,570
- VALUA: 5,930//6,156
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