Multiple Positive Technical Events Registered
All the major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ as trading volumes rose from the prior session. All closed at or near their intraday highs with several positive technical events registered on the charts, leaving all but one in near-term uptrends.
The data has become a bit more mixed now that markets have rallied from their recent lows with one of the McClellan OB/OS Oscillators now overbought. However, the shifts in the data are not enough to cause a change in our current near-term “neutral/positive” macro-outlook for equities as market breadth continues to improve.
On the charts, all the major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ on higher trading volumes.
- All closed at or near their intraday highs with the SPX, COMPQX and NDX posting new closing highs.
- Importantly, the other indexes joined in with the DJT, MID, RTY, and VALUA all closing above their respective resistance levels.
- As such, all are in near-term uptrends except the DJI remaining neutral.
- We reiterate our focus on the MID as its violation of a four-month resistance level suggests the potential for a new up leg, in our opinion.
- Market breadth also improved with the All Exchange and NASDAQ cumulative advance/decline lines turning near-term positive from neutral, joining the NYSE A/D.
- No stochastic signals were generated.
The data saw some slight deterioration.
- The McClellan 1-Day OB/OS Oscillators find the NASDAQ now overbought with the rest neutral (All Exchange: +47.25 NYSE: +.34.89 NASDAQ: +56.75).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders turned bearish from neutral at 1.12 as they increased their leveraged long exposure.
- In contrast, the Open Insider Buy/Sell Ratio dipped to 38.5 as some insiders sold into the rally. However, it remains in neutral territory.
- Last week’s contrarian AAII bear/bull ratio (32.77/35.43) and Investors Intelligence Bear/Bull Ratio at 18.5/51.1 (contrary indicator) both saw a rise in bears and dip in bulls and remain neutral and negative respectfully as their enthusiasm waned. New numbers for both will be available for us tomorrow.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $207.14 for the SPX. As such, the SPX forward multiple is 21.8 with the “rule of 20” finding fair value at approximately 18.7.
- The SPX forward earnings yield is 4.59%.
- The 10-year Treasury yield dipped to 1.31%. We view resistance at 1.4% with support at 1.23%. We reiterate the recent shift of the 10-year yield into a higher trading range could cause some issues for the markets.
In conclusion, while some of the data has slightly darkened, the notable improvement in market breadth and participation in rallies by other indexes suggest we maintain our near-term “neutral/positive” macro-outlook for equities.
SPX: 4,440/NA DJI: 35,000/35,495 COMPQX: 14,823/NA NDX: 15,139/NA
DJT: 14,692/14,952 MID: 2,710/2,780 RTY: 2,200/2,300 VALUA: 9,553/9,835
Source for all charts below: Worden
S&P 500
Dow Jones Industrials
NASDAQ Composite
NASDAQ 100
Dow Jones Transports
S&P Midcap 400
Russell 2000 Small Caps
