Data Remains Largely Neutral
The major equity indexes closed mostly lower during yesterday’s volatile session. The one outlier was the NDX actually managing to post a gain.
Of note was the fact that after a severe selloff earlier in the session, most managed to close at or near their intraday highs as buyers came in near the close.
However, two of the indexes did close below support as another closed below its 50 DMA. The bulk of the charts remain in near-term downtrends with the rest neutral.
The data saw little change with the McClellan OB/OS Oscillators staying neutral while the Rydex/OIBS dynamic barely budged as insiders have yet to show any real motivation to be buying their own stock.
We would note the large-cap growth names held up well throughout the session. Whether this suggests a possible rotation back into those names has yet to be determined. “One day does not a trend make.” So, we remain near-term “neutral” in our macro-equity outlook until the weight of the evidence suggests otherwise.
On the charts, the major equity indexes closed mostly lower yesterday, with notable intraday lows, except for the NDX posting a gain.
- Internals were negative on the NYSE and NASDAQ.
- While most managed to close at or near their intraday highs, the SPX and DJI closed below support while the MID closed below its 50 DMA.
- The action left the COMPQX and VALUA in near-term neutral trends while the rest ae in near-term downtrends that have yet to show signs of reversal.
- Cumulative market breadth is negative as well for the All Exchange and NASDAQ cumulative advance/decline lines with the NYSE A/D staying neutral.
- No stochastic signals were generated.
On the data, the McClellan 1-Day OB/OS Oscillators remain neutral (All Exchange: -29.24 NYSE: -42.94 NASDAQ: -6.02).
- The Rydex Ratio measuring the action of the leveraged ETF traders is unchanged at a neutral 0.53. They are no longer leveraged long but not yet leveraged short.
- This week’s AAII bear/bull ratio improved to 25.27/41.13, dropping to neutral. It suggests, as does the Rydex, that some of the speculative froth in the market has been removed.
- However, the Investors Intelligence Bear/Bull Ratio saw a rise in bullish sentiment at 17.1/66.1and remains in bearish territory.
- The Open Insider Buy/Sell Ratio remains neutral at 26.4. The lack of insider buying interest is of some concern, in our opinion.
- Valuation still appears extended with the forward 12-month consensus earnings estimate from Bloomberg rising to $189.34, leaving the SPX forward multiple at 21.7 with the “rule of 20” finding fair value at 18.3. The valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
- The SPX forward earnings yield is 4.6%.
- The 10-year Treasury yield closed at 1.68%. We view support as 1.63% with resistance at 1.75. Its movements have been significantly moving the equity markets of late and, we suspect, will continue to do so.
SPX: 4,120/4,183 DJI: 34,050/34,773 COMPQX: 13,020/13,500
NDX: 12,954/13,400 DJT: 15,270/15,950 MID: 2,701/2,737
RTY: 2,180/2,240 VALUA: 9,385/9,543