Data Neutral
All of the major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ as overall trading volumes declined from the prior session. The SPX managed to close above resistance, turning its trend to neutral from negative. No other technical events of import were generated. All of the data is now neutral as the 1 day McClellan OB;/OS Oscillators are no longer oversold. Futures this morning are currently suggesting a strong open. Nonetheless, we are hesitant to alter our near term “neutral/negative” outlook as, in our opinion, there has not been a sufficient shift in the evidence to warrant such a move.
On the charts, all if the indexes closed higher Friday with positive internals on lighter trading volume.
- All closed at or near their intraday highs but only the SPX (page 2) managed to close above near term resistance, leaving the rest in near term downtrends.
- The DJI (page 2), and COMPQX (page 3) closed at resistance.
- The NYSE cumulative advance/decline line turned neutral from negative but the NASDAQ and All Exchange remain negative and below their 50 DMAs. We continue to view the narrowing participation of stocks managing to gain traction as a cautionary component. Such conditions are frequently viewed as unhealthy with the leaders eventually succumbing to the general internal market weakness.
- High “volume at price” (VAP) levels are negative on all of the indexes with the exceptions of the COMPQX and NDX being neutral.
The data has turned entirely neutral including all of the 1-day McClellan OB/OS Oscillators (All Exchange:-13.86 NYSE:-14.09 NASDAQ:-11.7). Their previously oversold condition that contributed to recent gains no longer exist.
- The detrended Rydex Ratio (contrary indicator) remains neutral at -0.31 as is the % of SPX stocks trading above their 50 DMAs at 34.9.
- Last week’s AAII and Investors Intelligence Bear/Bull Ratios (contrary indicators) were neutral at 34.67/30.0 and 17.9/48.1 respectively.
- The Open Insider Buy/Sell Ratio continues to show an increase in insider buying but remains neutral at 83.0.
- Valuation appears appealing although forward estimates saw a minor but steady decline recently for the SPX. Currently, the 12-month forward consensus earnings estimate from Bloomberg for the SPX up ticked to $172.04, leaving the forward p/e at a 16.8 multiple while the “rule of twenty” finds fair value at 18.5.
- The 10-Year Treasury yield is 1.54%.
- The earnings yield stands at 5.96%.
In conclusion, while Friday saw nice gains and the futures indicate a positive open, we believe the charts and data continue to suggest a “neutral/negative” near term outlook remains appropriate.