Data Remains Largely Neutral
All the major equity indexes closed lower Tuesday except for the RTY, managing to post a minor gain. All closed at or near their intraday lows after giving up the gains seen earlier in the session.
Internals were mixed on the NYSE and negative on the NASDAQ. However, no support levels were violated while some of the charts are suggesting the possible formation of “inverted head & shoulders” patterns that would prove bullish should they come to fruition.
Yet, that is just speculation at this point as further development would be required to justify greater confidence.
Currently, all the indexes are in near-term downtrends except for the DJI being neutral. The data is largely neutral and not giving strong signals in either direction. As such, while we keep looking for some patches of blue sky, none have yet to appear, leaving the near-term market correction intact.
On the charts, all the major equity indexes, except for the RTY, closed lower yesterday with positive breadth but negative up/down volume on the NYSE with the NASDAQ negative on both counts.
However, while the gains seen early in the session faded away into the close, no support levels were violated on the charts.
The net result regarding trends is the DJI remains neutral with the rest in near-term downtrends. While the larger cap indexes are possibly forming “inverted head & shoulder” patterns that would prove beneficial, it is, in our opinion, too early to have confidence in their validity. Further development of said patterns are required.
Meanwhile, market breadth remains negative for the cumulative advance/decline lines on the All Exchange, NYSE and NASDAQ with all below their 50 DMAs. Some stochastic readings are oversold across the board with some in the low single digits. However, actionable bullish crossover signals have yet to appear.
The data finds the McClellan 1-Day OB/OS only mildly oversold on the NASDAQ while the rest returning to neutral (All Exchange: -47.78 NYSE: -41.76 NASDAQ: -51.27).
- The % of SPX issues trading above their 50 DMAs (contrarian indicator) dipped to 49%, remaining neutral.
- The Open Insider Buy/Sell Ratio rose to 49.4 but also remains neutral.
- The detrended Rydex Ratio (contrarian indicator) lifted to +0.04, also staying neutral versus its prior bullish implications near the March lows.
- This week’s AAII Bear/Bull Ratio (contrarian indicator) slipped to 1.17 as the crowd became a bit less cautious, leaving its forecast as bullish. Meanwhile the Investors Intelligence Bear/Bull Ratio (contrary indicator) is now 31.0/39.1, remaining very bullish.
- The forward 12-month consensus earnings estimate from Bloomberg for the SPX lifted to $235.15. As such, the SPX forward multiple stands at 18.7 with the “rule of 20” finding ballpark fair value at 17.3. The SPX forward earnings yield is now 5.35%.
- The 10-year Treasury yield closed lower at 2.73. We view resistance as 2.88% while it is far enough back on the charts that it may not be very effective. Support is 2.41%.
In conclusion, the consolidation of the March rally continued with still no signs generated at this stage to suggest it has been completed.
SPX: 4,382/4,490 DJI: 34,086/34,759 COMPQX: 13,234/13,965 NDX: 13,952/14,321
DJT: 14,465/15,177 MID: 2,597/2,682 RTY: 1,950/2,000 VALUA: 9,323/9,9493