Data Largely Neutral Except For Extreme Bearish Sentiment
All the major equity indexes closed lower Thursday with negative internals on the NYSE and NASDAQ as trading volumes declined on both exchanges from the prior session. All closed near their intraday lows after several tested their near-term resistance levels at the open that failed to be violated. As no resistance or support levels were violated, all but the VALUA, which is in a downtrend, remain in near-term neutral patters. We would note however, post what we view as the washout session on February 24, all but the COMPQX have been making a series of higher lows that suggest buying demand has been getting more aggressive on each pullback. The data is showing a notable increase in bearish sentiment on the Rydex Ratio, showing excessive bearish sentiment overall which, we view as a positive due to its contrarian implications. So, for now, the charts suggest we remain in neutral patterns with the caveat that extreme bearish sentiment poses a possible upside catalyst should some positive news hit the tape.
On the charts, all the major equity indexes closed lower yesterday with negative internals and lower volume as all closed near their lows of the session, no support levels were violated.
- The S&P 500, Dow Jones Industrial Average, COMPQX (page 3), NASDAQ 100, and Russell 2000 tested their respective levels at the start of the session but failed to violate.
- In fact, we would draw attention to the fact that all the indexes, except the COMPQX (page 3), have been making higher intraday lows post what we view as the washout on February 24. This suggests buyers have been getting more aggressive on each subsequent pullback. While not definitive, we do view it as somewhat encouraging.
- Thus, all but the VALUA, that is near-term negative, remain in neutral near-term trends.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain neutral as well.
- No stochastic signals of import were generated.
Data remains generally neutral except for investor sentiment.
- The McClellan 1-Day OB/OS oscillators remain neutral (All Exchange: +15.33 NYSE: +24.84 NASDAQ: +6.87).
- The % of SPX issues trading above their 50 DMAs dipped to 33%, staying neutral.
- The Open Insider Buy/Sell Ratio (page 9) is neutral, dipping slightly to 45.5.
- The detrended Rydex Ratio (contrarian indicator page 8) however, sank to -1.56. They are now heavily leveraged short, adding to the already heavy levels of bearish sentiment.
- This week’s AAII Bear/Bull Ratio (contrarian indicator) remained a potentially significant factor for the near term, as well. The AAII reading was 1.98 versus its prior 1.79 and found the crowd near peak levels of fear. As a contrarian indicator, it is potentially a strong positive should any good news hit the tape.
- The Investors Intelligence Bear/Bull Ratio (31.0/32.2) (contrary indicator page 9) remains bullish as well.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg for the SPX rising to $226.04. As such, the SPX forward multiple is now 19.3 with the “rule of 20” finding ballpark fair value at 18.2.
- The SPX forward earnings yield stands at 5.18%.
- The 10-year Treasury yield closed at 1.84. We view resistance at 1.92% and support at 1.77%.
SPX: 4,286/4,394 DJI: 33,214/34,006 COMPQX: 13,378/13,896 NDX: 13,778/14,234
DJT: 15,004/15,578 MID: 2,623/2,682 RTY: 1,990/2,090 VALUA: 9,221/9,483