10-Year Treasury Yield Violates Resistance
All the major equity indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as all closed at or near their intraday highs. The charts saw several resistance levels violated that resulted in all the indexes currently in near-term uptrends.
Market cumulative breadth improved as well. And while the data dashboard remains generally neutral in its message, we remain hesitant to elevate our current near-term macro-outlook for equities from “neutral” as the 10-year Treasury yield also violated resistance and the valuation spread continues to widen.
As well, while the stochastic levels are well into overbought territory and can remain so for extended periods, they suggest buyers may chasing price at current levels.
On the charts, all the major equity indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as all closed at or near their intraday highs with buyers remaining in control through the end of the session.
- The charts saw several indexes close above resistance with the SPX, DJI, COMPQX, NDX, and MID achieving that success.
- Regarding trend, the gains left all the indexes now in near-term uptrends.
- As well, cumulate market breadth improved with the All Exchange, NYSE and NASDAQ A/Ds all near-term positive and above their 50 DMAs.
- The one proverbial fly in the ointment is the stochastic levels for the indexes as all are well into overbought territory and suggest buyers may be chasing price currently. They are capable of remaining overbought for extended periods, however, and have yet to flash bearish crossover signals.
The data finds the McClellan 1-Day OB/OS Oscillators mostly in neutral territory with the exception on the NYSE that is mildly overbought (All Exchange: +42.36 NYSE: +51.42 NASDAQ: +35.72).
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders remains neutral and unchanged at 0.89.
- The Open Insider Buy/Sell Ratio remains neutral as well at 50.8. While still neutral, recent buying by insiders is an encouraging improvement.
- This week’s contrarian AAII Bear/Bull Ratio (36.43/30.5) remained mildly bullish as bears still outnumber bulls. The Investors Intelligence Bear/Bull Ratio (22.7/42.1) (contrary indicator) remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $214.05 for the SPX. As such, the SPX forward multiple is 21.1 with the “rule of 20” finding fair value at approximately 18.4 as the valuation gap has been widening.
- The SPX forward earnings yield is 4.74%.
- The 10-year Treasury yield violated resistance closing at 1.64%. Its uptrend remains intact with new resistance at 1.70% with support at 1.47%. In our opinion, said trend could prove problematic for equities.
In conclusion, while everything looks rosy on the charts, stochastic levels suggest we could be chasing price here while the 10-year Yield is becoming more of a potential threat. We remain “neutral” in our near-term macro-outlook for equities.
SPX: 4,428/4,530 DJI: 34,916/35,653 COMPQX: 14,748/15,201 NDX: 15,009/15,512
DJT: 14,600/15,304 MID: 2,713/2,779 RTY: 2,250/2,290 VALUA: 9,464/9,827
All charts courtesy of Worden
S&P 500
Dow Jones Industrials
NASDAQ Composite
NASDAQ 100
Dow Jones Transports
S&P Midcap 400
Russell 2000 Futures
