Insiders Continue To Back Off On Buying
All of the major equity indexes closed lower Tuesday with negative internals on the NSYE and NASDAQ as trading volumes increased on both exchanges from the prior session. The bulk of the charts suffered various forms of technical damage as several saw violations of trend. The data is mixed but we would note insiders have yet to view this weakness as a buying opportunity as they continue to cut back on their buying activity. However, valuation has improved. Nonetheless, we are maintaining our near term “neutral” near term outlook for the major equity indexes while on the cusp of becoming more cautionary.
On the charts, all of the indexes closed lower yesterday with negative internals on heavy trading volume.
- The bulk of the charts saw some form of deterioration.
- The DJI (page 2) closed below support as well as its 50 DMA, turning its trend to negative from neutral.
- The SPX (page 2) broke support and its uptrend line turning its trend to neutral.
- The COMPQX (page 3), NDX (page 33), DJT (page 4) and MID (page 4) all broke below their uptrend lines as well as they are now in neutral trends.
- So we now find only the RTY (page 5) in an uptrend, the DJI in a downtrend and the rest neutral.
- The cumulative advance/decline lines have shifted as well for the All Exchange, NYSE and NAASDAQ from positive to neutral.
The data has become more mixed.
- The All Exchange and NYSE 1 day McClellan OB/OS Oscillators have moved into oversold territory with the NASDAQ staying neutral (All Exchange:-53.15 NYSE:-69.76 NASDAQ:-40.05).
- While also remaining neutral, the % of SPX stocks trading above their 50 DMAs has weakened to 52.9%.
- Sentiment indicators are still disturbing as insiders are still backing away from the buying table as it has slipped to 28.6% and just shy of turning negative while the detrended Rydex Ratio (contrary indicator) remains bearish as the leveraged ETF traders are overly bullish at 0.86.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX now stands at $171.71, leaving the forward p/e at a 16.8 multiple while the “rule of twenty” finds fair value at 17.6, easing some of our prior valuation concerns. The earnings yield stands at 5.95%.
In conclusion, trade talks have had impact resulting in chart and breadth deterioration while sentiment remains a concern. While we are tempted to become more cautionary, we are holding our near term “neutral” outlook for the major equity indexes in place at this time.