Two Indexes Shift Trends to Positive
Forward 12 Month SPX Earnings Estimates Pop
The major equity indexes closed mostly higher Monday with positive internals on the NYSE and NASDAQ as trading volumes rose from the prior session. The one outlier was the DJT posting a loss as the rest gained and closed near their intraday highs.
Two index charts turned positive from neutral while the DJI posted a new closing high. The data now finds the McClellan 1-day OB/OS Oscillators overbought while investor sentiment is little changed from last week’s outlook.
We would also note the sizable lift in consensus forward 12-month earnings estimates from Bloomberg from $216.01 to 222.07 as a new forward quarter was added. We remain near-term “neutral/positive” in our macro-outlook for equities.
On the charts, the indexes closed mostly higher yesterday with positive internals on higher trading volume for both the NYSE and NASDAQ. Only the DJT posted a loss as the rest gained and closed near their highs of the day.
- Technical improvements were seen on the DJI that closed at a new closing high and above resistance, turning its trend positive, while the RTY closed above resistance, turning positive as well.
- So, we find the short-term trends positive on the NDX, DJI, and RTY as the rest remain neutral.
- Market breadth improved on the All-Exchange cumulative advance/decline line that turned positive while the NYSE’s closed above its 50 DMA. The NASDAQ A/D remains neutral.
- Stochastic levels remain overbought but bearish crossover signals have yet to appear.
The data finds the McClellan 1-Day OB/OS Oscillators overbought across the board (All Exchange: +63.38 NYSE: +73.51 NASDAQ: +55.46).
- The % of SPX issues trading above their 50 DMAs lifted to 71% and remains neutral but near the upper end of its range for last year.
- The Open Insider Buy/Sell Ratio was unchanged at 31.3 and remains neutral.
- Meanwhile, the detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.13 but remains bearish.
- This week’s contrarian AAII Bear/Bull Ratio dropped to 1.12 but remained bullish as the crowd remains skeptical of the recent rally.
- The Investors Intelligence Bear/Bull Ratio (24.4/55.0) (contrary indicator) was unchanged and remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising notably to $222.07 for the SPX as a new forward quarter was added to the mix. As such, the SPX forward multiple is 21.6 with the rule of "20" finding fair value at approximately 18.4.
- The SPX forward earnings yield is 4.63%.
- The 10-year Treasury yield rose to 1.63% and above resistance. We view support for the 10-Year at 1.50% with new resistance at 1.7%.
In conclusion, we remain “neutral/positive” in our near-term macro-outlook for equities although some of the data is suggesting possible slowing of strength, given the OB/OS levels.
SPX: 4,694/4,800 DJI: 35,960/NA COMPQX: 15,510/15,896 NDX: 16,300/16,607
DJT: 15,983/16,524 MID: 2,777/2,866 RTY: 2,230/2,300 VALUA: 9,678/9,972