All of the indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as overall volumes declined from those of the prior session. Several of the index charts improved as more short term downtrend lines and resistance levels were violated. Cumulative breadth improved as well. However, given recent strength, the data has moderated a bit regarding its bullish signals. So while there may be some slowing of progress, we remain of the opinion that the near term outlook for the major equity indexes should remain “neutral/positive” as determined in .
- On the charts, all of the indexes closed higher yesterday with positive internals as all closed at or near their intraday highs. Overall trading volumes dipped from the prior session. Several improvements were registered as the DJI (page 2) closed above resistance while the NDX (page 4) closed above resistance and its short term downtrend line as did the VALUA (page 5) and RTY (page 5). The DJT (page 4) and MID (page 4) closed above their short term downtrend lines. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ turned positive but remain below their 50 DMAs.
- The data has moderated a bit. The 1 day McClellan OB/OS Oscillators find the All Exchange and NASDAQ mildly over bought but all of the 21 day levels remain oversold (All Exchange:+50.29/-78.47 NYSE:+48.71/-67.68 NASDAQ:+53.66/-87.93). However, in spite of recent gains, the Open Insider Buy/Sell Ratio (page 9) remains very bullish as insiders continue to actively buy their shares with a 181.3 reading, although slowing slightly. The % of SPX components trading above their 50 DMAs (contrary indicator page 9)) remains very depressed at 25.2. 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. Finally, valuation, assuming current estimates hold, remains below implied fair value with the forward 12 month earnings estimates for the SPX via Bloomberg at $172.33, leaving the forward 12-month p/e for the SPX at 15.9 versus the “rule of 20” implied fair value of a 16.9 multiple. The “earnings yield” stands at 6.29%.
- 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.
- : 2,682/2,749
- : 24,776/25,500
- : 7,275/7,434
- : 6,892/7,079
- : 9,820/10,380
- : 1,790/1,863
- : 1,500/1,570
- VALUA: 5,930//6,156