Charts See Multiple Technical Improvements
All the major equity indexes closed higher yesterday with positive internals on the NYSE and NASDAQ as trading volumes rose on both from the previous session.
Demand was strong enough to leave all at or near their intraday highs as the charts saw multiple long awaited technical improvements, including violations of resistance and downtrend lines.
Meanwhile, the data remains rather benign except for investor sentiment data (contrarian indicator) that, according to briefing.com, finds bullish sentiment at a 30-year low.
As such, the combination of chart improvements and extreme investor fear suggest we may well have finally seen the completion of the correction from the March rally.
On the charts, all the major equity indexes closed higher yesterday with positive internals on the NYSE and NASDAQ on higher trading volumes. Buying interest was strong enough to leave all at or near their intraday highs at the close with the following technical chart improvements.
The DJI, DJT, MID, and VALUA all closed above resistance. The COMPQX, NDX, DJT, MID and VALUA closed above their near-term downtrend lines and are now neutral versus their prior bearish trends. Also, the SPX and VALUA closed back above their 50 DMAs.
So, all trends are now near-term neutral except for the SPX that remains negative.
There was some breadth improvement as well as the All-Exchange cumulative advance/decline line joined the NYSE in a neutral trend while the NASDAQ's remains negative. There were no new bullish stochastic crossover signals. However, those generated over the past few sessions have been proven prescient.
The data remains largely neutral except for the investor sentiment data that shows an increase in crowd fear.
- The McClellan 1-Day OB/OS oscillators remain neutral (All Exchange: -1.04 NYSE: +0.95 NASDAQ: -0.66).
- The % of SPX issues trading above their 50 DMAs (contrarian indicator) rose to 59%, remaining neutral.
- The Open Insider Buy/Sell Ratio slipped to 57.2, also staying neutral.
- The detrended Rydex Ratio (contrarian indicator) inched up to -0.21 but is also neutral versus its prior bullish implications near the March lows.
- Importantly, this week’s AAII Bear/Bull Ratio (contrarian indicator) rose to a very bullish 1.62 as crowd fear intensified. According to briefing.com, bullish sentiment is at a 30 year low on that survey. Meanwhile the Investors Intelligence Bear/Bull Ratio (contrary indicator) was 32.1/35.8, remaining bullish.
- The forward 12-month consensus earnings estimate from Bloomberg for the SPX rose to $236.09. As such, the SPX forward multiple stands at 18.9 with the “rule of 20” finding ballpark fair value at 17.1.
- The SPX forward earnings yield is now 5.29%.
- The 10-year Treasury yield closed higher at 2.91 and above resistance. We view new resistance as 3.0%. Support is 2.5%.
In conclusion, the combination of yesterday’s market strength, resulting in several technical improvements on the charts, combined with historically high levels of investor fear suggest yesterday may well have marked the conclusion of the market’s correction of the March rally gains.
SPX: 4,382/4,466 DJI: 34,278/35,042 COMPQX: 13,234/13,724 NDX: 13,833/14,321
DJT: 14,783/15,371 MID: 2,634/2,695 RTY: 1,980/2,040 VALUA: 9,385/9,576