Data Remains Largely Neutral
Opinion
All of the indexes closed lower Tuesday with negative internals on both the NYSE and NASDAQ as volumes rose from the prior session. No support levels were violated on the charts although two indexes saw dips below their short term uptrend lines. The data remains largely neutral. As discussed yesterday, while the overbought stochastic levels implied some pause or retracement of the recent gains may come to the fore, said stochastics are still overbought. We are maintaining our near term “neutral/positive” outlook for the major indexes for the near term.
- On the charts, all of the indexes closed lower yesterday with negative internals and higher than prior trading volumes on both the NYSE and NASDAQ. Most closed near the midpoint of their intraday ranges. However, no support levels were violated on the charts. Yet we did see the near term uptrend lines for the DJI (page 2) and DJT (page 4) violated on a closing basis, turning their near term trend from positive to neutral. The rest of the indexes remain in short term uptrends as do the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ. Yesterday’s note discussed the overbought stochastic levels on all of the indexes that, in our opinion, implied potential for a pause or some retracement of the prior seven day rally. Those stochastic levels remain overbought but have yet to flash bearish crossover signals that would heighten concerns.
- The data is largely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+20.48/+15.54 NYSE:+16.15/+20.82 NASDAQ:+26.19/+12.19). The OpenInsider Buy/Sell Ratio (38.7) and Equity Put/Call Ratio (0.62) are neutral as well. We do find positive signals coming from the Total P/C (contrary indicator) at 1.11 as the crowd is long puts while the OEX P/C at 0.73 finds the pros long calls. Valuation finds the forward 12 month P/E for the SPX based on forward 12 month consensus earnings estimates from Bloomberg of $162.92 at a 16.6 multiple versus the “rule of 20” implied fair value of 16.9.
- 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 continues to exist.
- 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