1-Day McClellan Remain OB/OS Oversold
All of the major equity indexes closed lower Friday with negative internals on the NYSE and NASDAQ as overall volume rose from the prior session. The charts saw all of the indexes close below their respective support levels, remaining in near term downtrends. The data is split between neutral and positive readings. Nonetheless, we have yet to see sufficient shift in the weight of the evidence to alter our near term “neutral;/negative” outlook for the major equity indexes at this time.
On the charts, all of the indexes closed lower Friday with most closing at or near their intraday lows as volumes rose on both exchanges with negative internals.
- As well, all of the indexes closed below their near term support levels while remaining in near term downtrends and below their high “volume at price” (VAP) levels that suggest significant overhead resistance.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain negative and below their 50 DMAs.
- While all also find their stochastic readings oversold, none have yet to trigger bullish crossover signals.
The data remains mixed.
- The 1-day McClellan OB/OS Oscillators are still oversold (All Exchange:-88.09 NYSE:-89.54 NASDAQ:-91.3).
- The detrended Rydex Ratio (-0.38), Open Insider Buy/Sell Ratio (91.8) and % of SPX stocks above their 50 DMAs (28.1) are all neutral. Last week’s crowd sentiment was neutral with the AAII Berar/Bull Ratio at 32.67/32.0. However, the Investors Intelligence Bear/Bull Ratio (contrary indicator) was negative at 17.2/49.5 suggesting advisors remain overly bullish. We would not be surprised to see more of a shift with the release of the new data tomorrow morning.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX dipped to $171.19, leaving the forward p/e at a 16.1 multiple while the “rule of twenty” finds fair value at 17.9 suggesting the SPX is undervalued. Of course, that is based on the assumption that said estimates will hold. The shift in valuation has largely been due to the notable drop in the 10 Year Treasury yield to 2.14%. The earnings yield stands at 6.22%.
In conclusion, while the OB/OS data remains oversold, the rest of the information suggests we maintain our near term “neutral/negative” outlook for the major equity indexes.