McClellan 1-Day OB/OS Oscillators Remain Neutral
The major equity indexes closed mixed Wednesday with positive internals on the NYSE and NASDAQ as trading volumes declined from the prior session.
No significant technical events were generated on the charts beyond the COMPOQX and NDX making slightly higher new closing highs. The chart near-term trends remain mixed and, in our opinion, continue to suggest rotation out of cyclical names into growth is ongoing.
The data is little changed with the McClellan 1-day OB/OS Oscillators staying neutral while psychology data continues its cautionary tone. So, as of yesterday’s close, we still find a lack of evidence that would cause a shift in our current near-term “neutral/positive” macro-outlook for equities.
On the charts, the major equity indexes closed mixed yesterday with positive internals but on lighter trading volumes.
- The SPX, DJI and DJT closed lower while the rest posted minor gains with the COMPQX and NDX posting new closing highs once again.
- We reiterate our opinion that the action of the indexes suggests a continuing of rotation out of cyclical names, that had huge runs this year, into more growth-oriented stocks.
- The near-term trends remain positive on the SPX, COMPQX and NDX with the DJI and VALUA neutral and the rest near-term bearish.
- Market breadth remains neutral on the All Exchange, NYSE and NASDAQ cumulative advance/decline lines as all are still above their 50 DMAs.
- No stochastic signals were generated at the close.
Regarding the data, McClellan 1-Day OB/OS Oscillators remain neutral and not yet threatening, in our opinion (All Exchange: -13.99 NYSE: -29.32 NASDAQ: -2.05).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders rose to 1.26 and remains in bearish territory.
- This week’s contrarian AAII bear/bull ratio (22.23/41.8) was little changed and remains mildly bearish as does the Investors Intelligence Bear/Bull Ratio (contrary indicator) at a bearish 16.3/54.
- The Open Insider Buy/Sell Ratio dipped to 23.7 and remains bearish as well.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $192.31 for the SPX. As a result, the SPX forward multiple now stands at 22.1 with the “rule of 20” finding fair value at 18.5.
- The SPX forward earnings yield is 4.53%%.
- The 10-year Treasury yield lifted to 1.49. We view support at 1.4% and resistance at 1.55%. The 10-year yield remains in a downtrend from its March peak that we view as a positive for equities in general.
In conclusion, we have yet to see enough of a shift in the weight of the evidence to alter our near-term “neutral/positive” macro-outlook for equities.
SPX: 4,192/4,255 DJI: 33,174/34,248 COMPQX: 13,910/NA
NDX: 13,974/NA
RTY: 2,225/2,295 VALUA: 9,386/9,695