Most Data Remains Neutral
All the major equity indexes closed lower Wednesday with negative internals on the NYSE and NASDAQ as trading volumes declined on both exchanges. While two of the index near-term trends shifted from bullish to neutral, no support levels were violated, leaving them in a mix of bullish and neutral near-term trends. Meanwhile, the data continues to send a generally neutral message, including the 1-day McClellan OB/OS Oscillators whose prior oversold conditions portended the recent rally. As such, while yesterday was a down day for the markets, we do not see enough evidence to cause a change in our current near-term “neutral/positive” macro-outlook for equities.
On the charts, all the major equity indexes closed lower yesterday with negative internals on lighter trade volumes. All closed at or near their intraday lows.
- The only technical events worthy of note were the SPX (page 2) and MID (page 4) closing below their near-term uptrend lines that changed their trend status to neutral from bullish.
- In our opinion, of equal import was the fact that no support levels were violated on any of the charts.
- So, the near-term trends are evenly split with the COMPQX (page 3), NDX (page 3), DJT (page 4) and VALUA (page 5) bullish and the rest neutral.
- We repeat our observation that the MID recently tested resistance that has been in place for the past three months. Should said resistance be violated, it may prove to be a potentially important breakout for that index.
- Market breadth finds the All Exchange and NASDAQ cumulative A/D lines neutral with the NYSE still positive but dipping below its 50 DMA.
- No stochastic signals were generated.
- The data remains mostly neutral.
The McClellan 1-Day OB/OS Oscillators remain in neutral territory post their prior oversold conditions that presaged the recent rally (All Exchange: +1.51 NYSE: -16.76 NASDAQ: +14.66).
- The Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders remains neutral, having lifted to 0.88.
- The Open Insider Buy/Sell Ratio is unchanged at a neutral 46.0.
- This week’s contrarian AAII bear/bull ratio (32.77/35.43) and Investors Intelligence Bear/Bull Ratio at 18.5/51.1 (contrary indicator page 9) both saw a rise in bears and dip in bulls and remain neutral and negative respectfully as their enthusiasm waned.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg at $206.56 for the SPX. As such, the SPX forward multiple is 21.6 with the “rule of 20” finding fair value at approximately18.7.
- The SPX forward earnings yield is 4.62%.
- The 10-year Treasury yield was flat at 1.34%. We view resistance as 1.4% with support at 1.23%. We reiterate the recent shift of the 10 Year yield into a higher trading range could cause some issues for the markets.
In conclusion, despite yesterday’s market weakness, we have yet to see our discipline suggest a shift in our current near-term “neutral/positive” macro-outlook for equities would be appropriate.
SPX: 4,440/NA
DJI: 35,000/35,495
COMPQX: 14,800/NA
NDX: 15,094/NA
DJT: 14,582/14,820
RTY: 2,200/2,260
VALUA: 9,485/9,708