Data Giving Mixed Signals
The major equity indexes closed mixed Tuesday with positive internals on the NYSE while the NASDAQ’s were negative as both saw an elevation of trading volume from the previous session.
The charts saw a few technical events registered in a mix of positive and cautionary signals. As such, the near-term trends for the indexes remain a combination of neutral and bullish implications.
Meanwhile, the data is mixed as well, yielding no strong implications for near-term activity. As well, the recent rise in the 10-year Treasury yield has put some downward pressure on the ballpark forward fair valuation for the SPX.
Our net takeaway is that while some action occurred on the charts and data, it was not sufficient to alter our current near-term “neutral/positive” macro-outlook for equities.
On the charts, the indexes closed mixed yesterday with strong trading volume as the NYSE saw positive internal action while the NASDAQ’s was negative.
- The SPX, COMPQX, and NDX posted losses as the rest advanced.
- The close found the DJI at a new closing high as both the DJT and VALUA closed above resistance, turning their near-term trends positive from neutral.
- On the other hand, the NDX closed below its near-term uptrend line and is now neutral while also flashing a bearish crossover signal.
- So, the near-term trends are neutral for the SPX, COMPQX, and NDX with the rest bullish.
- Market cumulative breadth was unchanged with the All Exchange and NYSE A/Ds positive and the NASDAQ’s neutral. Only the NYSE A/D is above its 50 DMA in that regard.
The data finds the McClellan 1-Day OB/OS Oscillators mixed with the All Exchange and NYSE somewhat overbought and the NASDAQ dropping to neutral (All Exchange: +50.21 NYSE: +65.51 NASDAQ: +38.3).
- The % of SPX issues trading above their 50 DMAs lifted to 78% and remains neutral but near the upper end of its range for last year. It is not a death knell, in our view, but suggests a potential increase in market selectivity.
- The Open Insider Buy/Sell Ratio rose to 38.1 and remains neutral.
- Meanwhile, the detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.12 but remains bearish.
- This week’s contrarian AAII Bear/Bull Ratio dropped to 1.12 but remained bullish as the crowd remains skeptical of the recent rally. The Investors Intelligence Bear/Bull Ratio (24.4/55.0) (contrary indicator) was unchanged and remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dipping slightly to $222.05 for the SPX. As such, the SPX forward multiple is 21.6 with the rule of "20" finding ballpark fair value dipping to 18.3.
- The SPX forward earnings yield is 4.63%.
- The 10-year Treasury yield rose to 1.67%. We view support for the 10-Year at 1.50% with resistance at 1.7%.
In conclusion, we remain “neutral/positive” in our near-term macro-outlook for equities as some turbulence has entered the picture with yesterday’s shifting of money moving into value stocks as some growth issues were exited.
SPX: 4,694/4,800 DJI: 36,300/NA COMPQX: 15,510/15,896 NDX: 16,237/16,607
DJT: 16,213/16,765 MID: 2,777/2,866 RTY: 2,230/2,300 VALUA: 9,837/10,090