Some McClellan OB/OS Oscillators Oversold
The major equity indexes closed mostly lower Monday with negative internals on theNYSE and NASDAQ as trading volumes declined on both exchanges from the prior session. The DJI made another new closing high as the rest posted losses with the MID near-term trend dropping back to neutral. The bifurcation of index performance persisted with a mix of bullish, neutral and negative near-term trends present. Cumulative market breadth is somewhat questionable as well. While a good portion of our data is unavailable this morning, we do find two of the McClellan OB/OS Oscillators oversold. However, it appears the 10-year Treasury yield continues to hold sway over the markets, in our opinion, as it closed near its recent high yesterday at 1.72% and looks higher pre-open. As such, we see no evidence being presented at this point to cause a change in our current near-term macro-outlook for equities at “neutral”.
On the charts, the major equity indexes closed lower yesterday with the exception of the DJI (page 2) making a new closing high.
- Internals were negative in the NYSE and NASDAQ on lighter trading volumes from the previous session.
- The MID (page 4) flipped back to a neutral near-term trend as it closed back below its near-term uptrend line.
- As such, we find the SPX (page 2), DJI, DJT (page 4) and VALUA (page 5) in near-term uptrends with the NDX (page 3) and MID neutral. The COMPQX (page 3) and RTY (page 5) remain in downtrends.
- Cumulative market breadth is less than thrilling with the All Exchange and NYSE advance/decline lines neutral as the NASDAQ’s remains bearish.
- Regarding stochastic levels, the DJT is now overbought but has not flashed a bearish crossover signal as yet.
A good portion of the data is unavailable this morning. However, the McClellan 1-day OB/OS Oscillators are now oversold on the All Exchange and NASDAQ with the NYSE staying neutral (All Exchange: -55.43 NYSE: -32.67 NASDAQ: -72.77).
- The Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders is neutral at 0.59 as of yesterday.
- The Open Insider Buy/Sell Ratio was unchanged at 36.0 and remains in neutral territory as well.
- Last week’s Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) changed slightly to a mildly bearish 19.6/55.9 from its prior bearish level.
- Valuation still appears extended with the forward 12-month consensus earnings estimate from Bloomberg lifting to $174.76, leaving the SPX forward multiple at 22.7 while the “rule of 20” finds fair value at 18.3. We reiterate the valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
- The SPX forward earnings yield stands at 4.4%.
- The 10-year Treasury yield rose to 1.72 and, in our opinion, remains in an uptrend. We continue to monitor it closely as it continues to have significant influence on the equity markets of late.
In conclusion, we remain “neutral” in our near-term outlook for the reasons discussed above.
DJI: 32,533/NA
COMPQX: 12,759/13,186
NDX: 12,690/13,140
DJT: 14,200/NA
MID: 2,570/2,634
VALUA: 8,735/9,0953