Data Remains Generally Neutral Except For High Investor Fear Levels
All the major equity indexes closed lower Friday with negative internals on the NYSE and NASDAQ as NYSE volumes rose and NASDAQ volumes dipped from the prior session. All closed at or near their intraday lows and found the DJI and NDX below their respective support levels at the session’s end.
As such, the chart trends are now a mix of neutral and negative projections while the data remains mostly neutral except for the investor sentiment readings that show a significant amount of bearish sentiment. As contrarian indicators, the sentiment data suggests should any positive news find its way to the tape, it may well have a greater impact than might otherwise be the case.
Unfortunately, such good news has yet to appear that would be a positive catalyst. And while market breadth saw some deterioration as well, the markets remain unresolved regarding a possible reversal to more positive action.
On the charts, all the major equity indexes closed lower Friday with negative internals as all closed near their lows of the session. While most successfully tested their support levels, the DJI and NDX violated support and are now in near-term negative trends as the rest remain neutral.
Cumulative market breadth deteriorated a bit as well with the advance/decline lines for the All Exchange and NASDAQ turning negative from neutral while the NYSE A/D remains neutral. Regarding stochastic levels, the DJI and NDX are now oversold but without bullish crossover signals as the rest stayed neutral.
The data is little changed. The McClellan 1-Day OB/OS oscillators are still neutral (All Exchange: -15.97 NYSE: -21.14 NASDAQ: -13.5).
- The % of SPX issues trading above their 50 DMAs dropped to 34%, staying neutral.
- The Open Insider Buy/Sell Ratio lifted to 37.7 and remains neutral as well.
- The detrended Rydex Ratio (contrarian indicator) rose to -0.25 but also remains neutral.
- However, the new contrarian AAII Bear/Bull Ratio (contrarian indicator) remains a potentially significant factor for the near term, in our opinion. The new AAII reading is 1.79 and still shows the crowd near peak levels of fear. It suggests, should some good news hit the tape, a positive market response may be greater than usual. However, said news has yet to appear.
- The Investors Intelligence Bear/Bull Ratio (25.9/34.7) (contrary indicator) remains mildly bullish as well as bearish sentiment rose slightly while the bulls retreated once again.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg for the SPX dropping to $224.23. As such, the SPX forward multiple is now 19.4 with the "rule of 20" finding ballpark fair value at 18.1.
- The SPX forward earnings yield stands at 5.16%.
- The 10-year Treasury yield closed at 1.93%. We view resistance at 2.05% and support at 1.8%
In conclusion, Friday’s action put a bit of a chink in the armor for the markets as geopolitical events continue to have influence. However, the high degrees of investor sentiment fear offer a slight ray of hope as any positive news may have greater than usual impact, in our opinion.
SPX: 4,350/4,497 DJI: 34,000/34,5466 COMPQX: 13,530/14,203 NDX: 13,930/14,486
DJT: 14,078/15,492 MID: 2,628/2,740 RTY: 1,990/2,140 VALUA: 9,385/9,657