Some Data Turning Cautionary
Opinion
All of the equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ as volumes dipped on the NYSE with NASDAQ volume rising slightly. All of the indexes made new closing highs, leaving their short term uptrends intact. The data, however, is starting to wave some yellow flags although none are what we would consider extreme at this point. As such, we remain of the opinion that the current near term uptrends of the indexes should continue to be respected until proven otherwise.
- On the charts, all of the indexes closed higher Friday with positive internals with all making new closing highs. While internals were positive, they were less so than the prior session. All of the near term uptrends remain intact with the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ positive and above their 50 DMAs.
- The data is raising some yellow flags as only the All Exchange and NYSE 1-day McClellan OB/OS Oscillators are neutral with the rest moving into overbought territory (All Exchange:+40.91/+57.92 NYSE:+26.24/+63.62 NASDAQ:+56.33/+53.78). However, the overbought readings are not yet what we would consider excessive. The Equity Put/Call Ratio (contrary indicator) is a bearish 0.5 while sentiment indicators remain cautionary with excessive bullish sentiment readings on the AAII Bear/Bull Ratio (20.0/53.67) and Investors Intelligence Bear/Bull Ratio (15.2/61.9). The OEX Put/Call Ratio is a neutral 1.0 as is the OpenInsider Buy./Sell Ratio at 30.3.
- In conclusion, while some warning signals are appearing in the data dashboard, the charts have yet to flash any sell signals that would cause us to change our current opinion that the near term trends of the indexes should be respected until proven otherwise.
- Forward 12-month earnings estimates for the SPX from Bloomberg were raised to $150.56, leaving a 5.4 forward earnings yield on a 18.5 forward multiple.
- SPX: 2,671/NA
- DJI: 24,678/NA
- NASDAQ: 6,890/NA
- NDX: 6,400/NA
- DJT: 10,582/NA
- MID: 1,893/NA
- Russell: 1,550/NA
- VALUA: 6,072/NA
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