Indexes Rise With A Few Chart ImprovementsData Remains Noncommittal
All the major equity indexes closed higher Wednesday with positive internals on the NYSE and NASDAQ as trading volumes declined from the prior session. Strength held through the close as all closed at or near their intraday highs. While no resistance levels were violated on the charts, some of the indexes moved back above their 50 DMAs as another shifted to neutral from negative. Yet, the bulk remain in short-term downtrends at this time.
There was some minor improvement in cumulative market breadth while the data is neutral across the board, giving no strong implications as to near term direction. As such, the action offered a dim ray of light regarding the possible culmination of the recent correction, in our opinion. However, the jury remains undecided until more positive evidence is presented.
On the charts, all the major equity indexes closed higher yesterday with positive internals on both exchanges as buyers stayed in control going into the close with all ending at or near their intraday highs.
No resistance levels were violated. However, the SPX, DJI, and VALUA managed to close back above their 50 DMAs. As well, the RTY closed above its downtrend line and is now neutral along with the DJI as the remainder are still in near-term downtrends.
Cumulative market breadth saw a slight improvement with the NYSE A/D turning neutral from negative. The NASDAQ and All Exchange remain negative. Stochastic levels remain oversold but close to bullish crossover signals levels.
The data is nondirectional in its near-term forecast.
- The McClellan 1-Day OB/OS oscillators are neutral on all (All Exchange: -2.87 NYSE: +0.59 NASDAQ: -4.13).
- The % of SPX issues trading above their 50 DMAs (contrarian indicator) rose to 54%, remaining neutral.
- The Open Insider Buy/Sell Ratio also rose to 56.5 but also remains neutral.
- The detrended Rydex Ratio (contrarian indicator) dipped to +0.03, 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 $235.22. As such, the SPX forward multiple stands at 18.9 with the “rule of 20” finding ballpark fair value at 17.3.
- The SPX forward earnings yield is now 5.29%.
- The 10-year Treasury yield closed lower at 2.69. 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, yesterday’s strength and ability to hold gains shed a slight ray of sunshine regarding the possible completion of the recent market correction. However, while somewhat encouraging, it is not sufficient to say so with conviction. More positive chart and data action is necessary, in our opinion.
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: 2,597/2,668 RTY: 1,980/2,040 VALUA: 9,323/9,9493