New Closing Highs Near Lows Of The Day
Insiders Step Up Selling Activity
The major equity indexes closed mostly higher Monday with only the NDX posting a loss. Internals were positive and the NYSE and NASDAQ as NYSE volumes dipped, and NASDAQ volumes rose from the prior session. Several new closing highs were achieved once again. However, this time said highs were achieved with the indexes closing near the lows of the session, unlike the previous that closed near their highs.
In our opinion, while the new highs are a positive, their closing levels may suggest the rally may be starting to run out of some steam. As well, as noted yesterday, several charts are at or near their return lines that have been effective in signaling retracements since last March. When combined with the data that shows a pickup in insider selling activity, we think it appropriate to maintain our near-term “neutral” macro-outlook for equities as selectivity of participants persists.
On the charts, the only one to close lower yesterday was the NDX after touching its return line in the prior session.
- Internals were positive on the NYSE and NASDAQ.
- The SPX, DJI, COMPQX, MID, RTY, and VALUA all made new closing highs. However, we would note that all but the VALUA closed near their lows of the day. New highs, prior to yesterday, closed near their highs. Thus, yesterday’s action may suggest some loss of the rally’s strength.
- As well, the SPX, DJI, COMPQX, and NDX all remain near their return lines that, since March, have presaged market retracements.
- All remain in near-term uptrends as do the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ.
- No stochastic signals were generated.
The data finds the McClellan 1-Day OB/OS only the NASDAQ still in overbought territory as the others remain neutral (All Exchange: +48.48 NYSE: +46.18 NASDAQ: +50.53).
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders rose to 1.23 and remains in bearish territory as they continue their leveraged long exposure.
- The Open Insider Buy/Sell Ratio dropped to 25.7 as insiders ratcheted up their selling activity. While neutral, it is now just shy of turning bearish.
- This week’s contrarian AAII Bear/Bull Ratio (27.73/42.73) remained neutral with the increase in bulls as did The Investors Intelligence Bear/Bull Ratio (24.1/54.0) (contrary indicator).
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dipping to $214.17 for the SPX. As such, the SPX forward multiple is 22.0 with the “rule of 20” finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.55%.
- The 10-year Treasury yield closed higher at 1.5%. We view resistance at 1.54% and support at 1.39%.
In conclusion, we remain “neutral” in our near-term macro-outlook for equities as the chart issues noted above and Insider/Rydex suggest some retracement may be in the offering over the near term.
SPX: 4,620/NA DJI: 35,904/NA COMPQX: 15,641/NA NDX: 15,975/NA
DJT: 16,842/NA MID: 2,852/NA RTY: 2,350/NA VALUA: 9,937/NA
All charts courtesy of Worden
S&P 500
Dow Jones Industrials
NASDAQ Composite
NASDAQ 100
Dow Jones Transports
S&P Midcap 400
Russell 2000
