Data Remains Mostly Neutral
The bulk of the indexes closed lower Wednesday with the one exception of the DJT posting a gain. Internals were negative on the NYSE and NASDAQ as volumes swelled on both exchanges. The charts saw some deterioration but, in our opinion, not as significant as one might assume given the intensity of the session. The data remains largely neutral with some positive signals coming from some put/call ratios. As such, and in spite of yesterday’s weakness, we are maintaining our near term “positive” outlook for the major equity indexes for the reasons discussed below.
- On the charts, the indexes closed mostly lower yesterday with negative internals on the NYSE and NASDAQ on heavy trading volume. The one exception was the DJT (page 4) posting a gain. Yet with all of the intraday intensity of selling, only the COMPQX (page 3) closed below near term support. All other support levels held as late session buying was strong enough to close the indexes well off of their intraday lows. The MID (page 4), RTY (page 5) and VALUA (page 5) closed below their 50 DMAs while the COMPQX, NDX (page 3) and VALUA (page 5) closed below their short term uptrend lines turning their trends to neutral from positive. As such, all of the indexes are in neutral trends with the exception of the DJT being positive. The cumulative advance/decline lines for the All Exchange and NASDAQ are negative with the NYSE’s neutral.
- The bulk of the data is neutral including all of the McClellan OB/OS Oscillators (All Exchange:-44.9/-13.41 NYSE:-44.17/+3.28 NASDAQ:-45.31/-26.69). The Equity Put/Call Ratio (0.66) and Open Insider Buy/Sell Ratio (40.9) are neutral as well. Positive signals are coming from the Total P/C (1.16) as the crowd is now nervous and long puts while the pros measured by the OEX P/C are loaded in calls and expecting strength at 0.58. Valuation finds consensus forward 12 month earnings estimates for the SPX at $169.06, leaving the forward 12 month p/e for the SPX at 16.7 versus the “rule of 20” implied fair value of a 17.2 multiple. The “earrings yield” stands at 6.0%.
- In conclusion, while yesterday saw some intense selling, late session buying was strong enough to limit the technical damage. Given that late session action tends to be viewed as “rational” versus “emotional” early trading while chart damage was moderate, we are maintaining our near term “positive” outlook for the major equity indexes.
- SPX: 2,790/2,853
- DJI: 25,000/26,000
- NASDAQ: 7,786/7,936
- NDX: 7,294/7,507
- DJT: 10,925/11,254
- MID: 1,966/2,008
- Russell: 1,654/1,712
- VALUA: 6,394/6,493
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