Still Not Seeing Bottom Signals
The major equity indexes closed mixed Wednesday with mixed internals on the NYSE on lower volume while the NASDAQ’s internals were negative on higher volume. All closed at or near their intraday lows as late session buying failed to appear. The net result was no appearance of technical events of import, leaving the near-term trends unchanged and a mix of neutral and bearish implications. Likewise, there was little change on the data dashboard that remains largely neutral in its forecast.
However, the forward consensus 12-month earnings estimate for the SPX from Bloomberg took another dip as they have been generally in a decline over the past few weeks. So, while we continue to keep our eyes open for signals suggesting a correction bottom is likely at hand, none have yet to appear, in our opinion. Thus, we think it appropriate to maintain our near-term “neutral/negative” macro-outlook for equities intact.
On the charts, the major equity indexes closed mixed yesterday with mixed NYSE internals and negative NASDAQ internals.
- Once again, the strong open faded throughout the day with all the indexes closing at or near their lows of the day as late session action, believed to be more rational than early session trading, failed to see an influx of active buyers as sellers dominated.
- The SPX, DJI, and MID posted gains as the rest saw declines. That left the near-term trends for the indexes unchanged with the SPX, COMPQX, and NDX in near-term downtrends with the rest neutral.
- Market breadth was unphased as well with the cumulative advanced/decline lines for the All Exchange, NYSE and NASDAQ remaining negative and below their 50 DMAs.
- No stochastic signals were generated.
The data finds the McClellan 1-Day OB/OS Oscillators staying neutral (All Exchange: -15.38 NYSE: -11.62 NASDAQ: -17.86).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders rose to 0.86 but remains neutral versus its prior bearish implications as the ETF traders slightly increased their long exposure.
- The Open Insider Buy/Sell Ratio, however, is still neutral and unchanged at 32.3.
- This week’s contrarian AAII Bear/Bull Ratio (35.23/30.4) and Investors Intelligence Bear/Bull Ratio (22.3/47.1) (contrary indicator) both saw a drop in bulls. They remain neutral but suggested the crowd was starting to get nervous.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dropping to $206.37 for the SPX. As such, the SPX forward multiple is 21.1 with the “rule of 20” finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.73%.
- The 10-year Treasury yield rose to 1.54%. we see resistance at 1.55% with support around 1.38%.
In conclusion, yesterday’s action combined with the charts and data suggest we have yet to see evidence appear that would cause a change in our near-term “neutral/negative” macro-outlook for equities.
SPX: 4,322/4,434 DJI: 34,226/34,814 COMPQX: 14,530/14,872 NDX: 14,540/15,123
DJT: 14,161/14,603 MID: 2,645/2,706 RTY: 2,210/2,280 VALUA: 9,361/9,733
S&P 500
Dow Jones Industrials
NASDAQ Composite
NASDAQ 100
Dow Jones Transports
S&P Midcap 400
Russell 2000 Futures
