Data Largely Neutral
Opinion
The indexes closed mixed yesterday with mixed internals on the NYSE and NASDAQ as both saw negative breadth but positive up/down volumes as overall volume rose on the NYSE and dropped on the NASDAQ. Multiple tests of resistance occurred on the charts but all failed to violate. The cautionary signals on the data from yesterday morning have largely abated and are now mostly neutral. As such, we remain “neutral/positive” in our near term outlook with the caveat that, after seven sessions of gains, the potential for some pause or degree of retracement may be increasing.
- The indexes closed mixed yesterday with the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (page 3) posting fractional gains while the rest saw minor losses. Internals were mixed on negative breadth. Virtually all of the indexes tested their respective resistance levels but none were able to violate on a closing basis with all closing at or near their intraday lows. The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs. However, all of the stochastic levels are overbought post six consecutive sessions of gains. As such, while bearish crossovers have yet to be registered, they imply potential for some pause in the rally or possible degrees of retracement of recent gains.
- The cautionary signals coming from the 1 day McClellan OB/OS Oscillators have abated as all of the OB/OS are now back in neutral territory (All Exchange:+40.68/+31.23 NYSE:+46.11/+42.63 NASDAQ:+35.85/+22.23). The Equity Put/Call Ratio (0.62), OpenInsider Buy/Sell Ratio (37.6) and new AAII Bear/Bull Ratio (26.67/32.33) are all neutral with the Total and OEX P/Cs mildly bullish at 0.88 and 0.99 respectively. Valuation finds the forward 12 month P/E for the SPX based on forward 12 month consensus earnings estimates from Bloomberg of $162.96 at a 16.8 multiple versus the “rule of 20” implied fair value of 17.0.
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- In conclusion, we are maintaining our near term “neutral/positive” outlook for the major equity indexes with the caveat that some expectation for a possible pause or retracement of some of the recent gains has entered the picture.
- SPX: 2,671/2,741
- DJI: 24,357/24,963
- Nasdaq 7,140/7,415
- NDX: 6,769/7,017
- DJT: 10,416/10,767
- MID: 1,895/1,918
- Russell: 1,564/1,610
- VALUA: 6,098/6,215