McClellan 1-Day OB/OS Oscillators Remain Overbought
All the major equity indexes closed lower Wednesday with negative internals on the NYSE and NASDAQ as trading volumes ended lower than the prior session. The charts closed either near their intraday lows or midpoints. However, the weakness had no impact on the near-term uptrends that exist on each of the indexes.
On the data side, the 1-day McClellan OB/OS Oscillators remained overbought while the investor sentiment readings (contrarian indicators) counterbalance and were encouraging as they still showed high levels of fear present within the "crowd" and advisor communities.
The rest of the data points were neutral. As such, we view yesterday’s action as that of a period of consolidation of recent gains that we continue to suspect may be the most likely forecast for the markets over the near-term.
On the charts, all the major equity indexes closed lower yesterday with negative internals on lighter trading volumes. However, the weakness did not result in any violations of support or trend, leaving all in near-term uptrends.
Cumulative market breadth remained positive for the All Exchange, NYSE and NASDAQ although the NASDAQ’s slipped below its 50 DMA as the others stayed above. Stochastic levels remained overbought but lacking bearish crossover signals at this time.
The data signals still find the McClellan 1-Day OB/OS oscillators overbought and suggesting the potential for more consolidation (All Exchange: +66.81 NYSE: +76.87 NASDAQ: +61.58).
- The % of SPX issues trading above their 50 DMAs (contrarian indicator) dipped to 68% and remains neutral.
- The Open Insider Buy/Sell Ratio lifted to 53.7, also staying neutral.
- The detrended Rydex Ratio (contrarian indicator) rose to -0.07 and was neutral versus its prior bullish implications near the market lows.
- This week’s AAII Bear/Bull Ratio (contrarian indicator), while dipping, remained bullish at 1.65 while the Investors Intelligence Bear/Bull Ratio (contrary indicator) was at 35.31/36.3, near peak fear levels seen 4 times over the past decade, as noted on its chart, each of which was also followed by a notable rally such as the one recently in play. The crowd remained fearful despite the rally’s strength.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg for the SPX lifted to $228.14. As such, the SPX forward multiple stands at 20.2 with the "rule of 20" finding ballpark fair value at 17.6.
- The SPX forward earnings yield was 4.96%.
- The 10-year Treasury yield closed lower at 2.36. We view resistance as 2.64% while support remains at 2.0%.
In conclusion, yesterday’s action appears to have been a day of consolidation that we suspect may have more time on the clock given the state of the charts, data and valuation.
SPX: 4,516/4,659 DJI: 34,697/35,518 COMPQX: 14,202/14,938 NDX: 14,642/15,358
DJT: 16,239/16,852 MID: 2,685/2,792 RTY: 2,080/2,145 VALUA: 9,551/9,922