1-Day McClellan OB/OS Remain Neutral

1 Day McClellan OB/OS Remain Neutral

Opinion

All of the indexes closed lower Monday with broadly negative internals on the NYSE and NASDAQ as volumes declined from the prior session. The charts saw several support levels violated as well as some short term trends turning negative. The data remains mixed and, in spite of the selloff, is not sending strong signals suggestive of a bounce, in our opinion. Given the chart weakness and data levels, we are maintaining our near term “neutral/negative” outlook for the major equity indexes in place that was instituted yesterday morning due to Friday’s action.

• On the charts, all of the indexes closed lower yesterday with broadly negative internals on the NYSE and NASDAQ. Multiple negative technical events occurred. The SPX (page 2), DJI (page 2), COMPQX (page 3), NDX (page 3) and DJT (page 4) all broke below near term support with the DJT also closing below its 50 DMA. The MID (page 4), RTY (page 5) and VALUA (page 5) closed above support but below their near term uptrend lines turning said trends from positive to neutral. The SPX, DJI, COMPQX, NDX, and DJT are now in short term downtrends. The rest are neutral. As well, the cumulative advance/decline lines for the All Exchange and NASDAQ turned negative with the NYSE’s remaining neutral.

• The data, in our opinion, is shy of suggesting a meaningful bounce is at hand as, in spite of the degree of decline, the McClellan 1 day OB/OS Oscillators remain neutral (All Exchange:+19.52/-57.91 NYSE:+32.17/-53.64 NASDAQ (+11.86/-64.19). While the 21 day readings are oversold, it is usually the 1 day levels that are prescient regarding bounce signals. The Total Put/Call Ratio (contrary indicator at 1.1) is bullish as the crowd increased its put exposure while the pros flipped to being long calls at a 0.87 OEX P/C. Yet sentiment has yet to show a notable increase in fear as the Rydex Ratio (contrary indicator) still finds the leveraged ETF traders heavily on the long side at 1.59. Valuation finds the SPX based on the forward 12 month consensus earnings estimates from Bloomberg of $163.49 at a 16.6 multiple versus the “rule of 20” implied fair value of 17.1.

• In conclusion, while some of our concerns regarding the level of chart extensions have moderated to some degree, the overall state of the charts and data suggest we maintain our near term “neutral/negative” outlook for the major equity indexes.
• SPX: 2,701/2,779
• DJI: 24,084/24,700
• NASDAQ: 7,426/7,679
• NDX: 6,955/7,191
• DJT: 10,395/10,771
• MID: 1,950/1,984
• Russell: 1,628/1,685
• VALUA: 6,291/6,398