All of the major equity indexes closed higher Tuesday with positive internals on the NYSE and NASDAQ as NYSE volumes increased from the prior session while NASDAQ volumes declined. There were some minor technical improvements on the charts while the data continues to send an almost exclusively neutral signal regarding near term movement probabilities. As such, we are maintaining our near term “positive” outlook for the major equity indexes at this time.
- On the charts, all of the indexes posted gains yesterday with positive internals on the NYSE and NASDAQ. Positive events occurred in the form of the SPX (page 2) closing above short term resistance, turning its trend to positive from neutral. Both the MID (page 4) and VALUA (page 5) made new closing highs although the MID’s achievement was fractional. We also saw the cumulative advance/decline line for the NASDAQ turn slightly positive from neutral. So now the only index not in a short term uptrend is the RTY (page 5) while all of the cumulative advance/decline lines are positive.
- The data is almost entirely neutral including all of the McClellan OB/OS Oscillators (All Exchange:+3.82/-6.6 NYSE:+6.21/+10.17 NASDAQ:+3.27/-20.94). The Equity Put/Call Ratio (0.64), OEX P/C (1.16) and Open Insider Buy/Sell Ratio (40.8) are all neutral as well. There was also a notable change in the detrended Rydex Ratio (contrary indicator) that measures the level of leveraged ETF trader’s optimism that dropped from a bearish 1.22 to a neutral 0.49. It is unusual to see such a dramatic move in a one day change for this metric. However, we don’t want to read too much into it as it may prove to be a one day anomaly. Valuation finds consensus forward 12-month earnings estimates for the SPX at $169.01, leaving the forward 12 month p/e for the SPX at 16.9 versus the “rule of 20” implied fair value of a 17.0 multiple. The “earrings yield” stands at 5.9%.
- In conclusion, given the current state of the charts and data, we are maintaining our near term “positive” outlook for the major equity indexes.
- : 2,790/2,853
- : 25,000/26,000
- : 7,698/7,892
- : 7,294/7,507
- : 10,925/11,254
- : 1,966/NA
- : 1,654/1,712
- VALUA: 6,394/NA