Data Remains Largely Neutral
Opinion: All of the indexes closed higher yesterday with positive internals as volumes rose from the prior session. All of the index charts closed above their near term resistance levels with most now trading above their prior short term downtrend lines. In spite of yesterday’s strength, we still find the majority of the data in neutral territory and largely unaffected. So given what we see as a notable shift in the weight of the chart implications and few cautionary data signals, we are altering our near term outlook for the major equity indexes from “neutral/negative” to “neutral/positive”.
· On the charts, all of the indexes closed higher yesterday with positive internals and on higher volume from the prior session. Virtually all of the indexes closed above their near term resistance levels, adjusted below, with the COMPQX (page 3) making a new closing high. The only index that remains below its 50 DMA and short term downtrend line is the DJI (page 2). So, all but the DJI are now in positive short term trends. As well, the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are now positive and above their 50 DMAs. While some are now overbought on their stochastic levels, no requisite bearish crossovers have yet occurred that would raise yellow flags.
· The data remains largely neutral. We would note that although there were notable moves on the indexes, there was no signal shift from the McClellan OB/OS Oscillators. Although they rose, all remain in neutral territory with the exception of the NYSE 21 day being overbought (All Exchange:+28.45/+43.52 NYSE:+36.33/+66.37 NASDAQ:+48.99/+25.55). The Equity Put/Call Ratio is still neutral at 0.61 as is the Oppenheimer Buy/Sell Ratio showing insiders neutral in their buy/sell activity. The Total (contrary indicator) and OEX Put/Call Ratios are counterbalancing at 1.05 and 1.54 respectively.
· In conclusion, given the action in the charts yesterday combined with the data remaining largely neutral, we are of the opinion that there was enough of a shift in the weight in the evidence to warranty changing our near term outlook for the major equity indexes from “neutral/negative” to “neutral/positive”.
· Forward 12 month earnings estimates for the SPX from IBES of $134.42 leave a 5.66 forward earnings yield on a 17.7 forward multiple, near a decade high.
SPX: 2,329/2,377
DJI: 20,378/20,845
COMPQX; 5,857/NA
DJT: 8,990/9,306
MID: 1,700/1,748
RTY: 1,360/1,409
VALUA: 5,392/5,526