Data Remains Mostly Neutral
Opinion
The majority of the indexes closed higher Wednesday with the one outlier of the DJI posting a loss. Internals were positive on the NYSE and NASDAQ as NYSE volumes dipped form the prior session while those of the NASDAQ rose. More new closing highs were seen on some of the charts as their uptrends remain intact. The data is generally neutral with the exception of advisor sentiment being overly bullish. As such, the current state of the data and charts has yet to warrant a change in our current near term “neutral” outlook for the major equity indexes.
- On the charts, only the DJI (page 2) closed lower yesterday as the rest posted gains. We would note that the DJI did close on support and its 50 DMA suggesting it be watched closely for a possible negative break. On the other end, the COMPQX (page 3), NDX (page 3), RTY (page 5) and VALUA (page 5) all made new closing highs, accentuating the split performance among the indexes, leaving the SPX (page 2) and DJI near term trends neutral with the rest positive. Only the COMPQX and NDX continue to have overbought stochastic levels. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ have shifted back to positive from neutral and remain above their 50 DMAs. We would repeat our observation that some of the indexes continue to trade well above their 50 DMAs and support that implies some degree of caution should be observed.
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- The data is mostly neutral including all of the McClellan OB/OS Oscillators (All Exchange:+36.75/+1.41 NYSE:+43.92/-3.78 NASDAQ:+35.71/+8.43). The Equity Put/Call Ratio (0.56) and OpenIsider Buy/Sell Ratio (31.4) are neutral as well while the OEX Put/Call Ratio is a very bearish 2.09 as the pros have now gone heavily long puts, betting on some near term weakness occurring. Sentiment remains a concern as it suggests complacency is dominating opinion, particularly among advisors. Valuation finds the SPX near fair value based on the forward 12-month consensus earnings estimates from Bloomberg of $163.25 at a 17.0 multiple versus the “rule of 20” implied fair value of 17.1.
- In conclusion, we are maintaining our near term “neutral” outlook for the major equity indexes due to the current state of the charts and data. In spite of the positive chart trends, some sentiment data and extension of some charts suggest we should keep a jaundiced eye open.
- SPX: 2,736/2,784
- DJI: 24,665/25,337
- NASDAQ: 7,591/NA
- NDX: 6,943/NA
- DJT: 10,832/11,218
- MID: 1,950/NA
- Russell: 1,628/NA
- VALUA: 6,291/NA