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Near-Term Outlook Remains “Neutral/Positive”

Published 02/23/2018, 12:00 PM
Updated 07/09/2023, 06:31 AM

Data Remains Mixed

Opinion

The indexes closed mixed Thursday with positive internals on the NYSE while NASDAQ internals were negative. Volumes declined on the NYSE and were flat on the NASDAQ. No technical events of import were generated on the charts while the data remains mixed. As such, we remain of the opinion that the indexes are going through a normal period of consolidation post high levels of volatility. Given the state of the charts and data, we maintain our near term “neutral/positive” outlook for the major equity indexes.

  • On the charts, the indexes closed mixed on the day with the SPX (page 2), DJI (page 2), NDX (page 3) and DJT (page 4) advancing slightly as the rest declined. No support or resistance levels were violated although the DJT did finally manage to close above its 50 DMA, turning its trend to neutral from negative, while the SPX slipped below its near term uptrend line. Essentially, we see the charts as being in a state of sideways consolidation that is not uncommon post a period of high volatility such as that seen at the beginning of the month. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are neutral and below their 50 DMAs.
  • The data is mixed. The 1-day McClellan OB/OS Oscillators are neutral with all of the 21-day levels now in oversold territory (All Exchange:+4.26/-56.06 NYSE:+4.51/-57.03 NASDAQ:+5.7/-51.23). The Equity Put/Call Ratio is a neutral 0.63 as is the Openinsider Buy/Sell Ratio at 27.8, although insider selling has picked up by that measure. The Total and OEX Put/Call Ratios are counterbalancing with a bullish 1.12 and bearish 2.58 respectively.
  • In conclusion, it is our opinion that the indexes are trying to stabilize post the rout seen at the beginning of February. Post periods of high volatility, it is not uncommon for the markets to chop sideways for a period before potentially resuming the prior uptrend. Given that valuation compressed fairly significantly during the downdraft along with signals suggesting a culmination of panic selling, we remain “neutral/positive” in our near term outlook.
  • Forward 12-month earnings estimates for the SPX from Bloomberg are $157.50 leaving a 5.8 forward earnings yield on a 17.2 forward multiple.
  • SPX: 2,626/2,733
  • DJI: 24,945/25,239
  • NASDAQ: 6,956/7,280
  • NDX: 6,538/6,898
  • DJT: 9,975/10,582
  • MID: 1,850/1,916
  • Russell: 1,511/1,547
  • VALUA: 5,818/6,103

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