Data Primarily Neutral
Opinion
The bulk of the indexes closed lower yesterday with the one exception of the DJT advance. Internals were negative in the NTSE and NASDAQ as volumes declined from the prior session on both exchanges. No important technical events were registered on the charts while the data is now largely neutral in nature. As such, we continue to believe the near term trends should be respected until proven otherwise. However, valuation and the stochastic readings suggest some pause/retracement may occur over the near term. This would not be unusual given duration and magnitude of the recent rally.
- On the charts, the only index to close higher yesterday was the DJT (page 3). The rest declined on negative internals but volumes dipped from the prior session. As such, all of the short term uptrends for the indexes remain intact while the cumulative advance/decline lines remain positive and above their 50 DMAs as well. Technically speaking, one cautionary signal was registered as the COMPQX (page 3) gave a bearish stochastic crossover signal. Yet said signals should be used for confirmation purposes. So although there may be some slowing of momentum, we would not consider this event significant unless the COMPQX closed below near term support. All of the remaining stochastic levels are overbought.
- The data is largely neutral. The McClellan OB/OS Oscillator 1 day levels are neutral while the 21-day readings remain overbought (All Exchange:+28.13/+84.86 NYSE:+44.65/+77.81 NASDAQ:+36.01/+64.34). The Total (0.84), Equity (0.61) and OEX (1.02) Put/Call Ratios are all neutral as are the AAII Bear/Bull Ratio (32.0/31.67) and Investors Intelligence Bear/Bull Ratio (20.2/47.1). The Open Insider Buy/Sell Ratio remains neutral as well at 40.0.
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- In conclusion, all of the near term trends remain positive on the charts as do the cumulative advance/decline lines, suggesting the trends should continue to be respected. However, the combination of valuation and stochastics may imply some slowing of momentum or partial retracement of recent gains over the short term.
- Forward 12-month earnings estimates for the SPX from Bloomberg of $137.37 leave a 5.56 forward earnings yield on a 18.2 forward multiple, over a decade high.
- SPX: 2,460/NA
- DJI: 21,840/NA
- Nasdaq: 6,361/NA
- DJT: 9,382/9,696
- MID: 1,740/1,781
- Russell: 1,414/1,452
- VALUA: 5,589/5,670