Data Remains Largely Neutral
All the major equity indexes closed lower Thursday except for the DJT posting a minor gain. Internals were negative on the NYSE and NASDAQ as trading volumes declined from the prior session. Most closed at or near their lows of the day. However, the selling pressure had no impact on the current neutral chart trends while support levels held. Meanwhile, the data continues to send a generally neutral message, including the McClellan 1-Day OB/OS Oscillators. As such, while the markets remain volatile, the charts and data suggest we maintain our near-term “neutral/positive” macro-outlook for equities at this stage.
On the charts, all the major equity indexes closed lower yesterday except for the DJT (page 4) positing a minor gain. Internals were broadly negative as trading volumes dipped. Most closed near their intraday lows as no buying of size came in to save the day.
- However, the magnitude of the losses was not sufficient to violate the near-term neutral trends on all the indexes as support levels held as well.
- As such. all the index near-term trends remain neutral.
- The only technical events noted from the action were the MID (page 4) and VALUA (page 5) closing below their 50 DMAs.
- Cumulative market breadth was unaffected as well with the NYSE cumulative A/D staying positive with the All Exchange and NASDAQ neutral.
- No stochastic signals were generated.
Looking at the data, the McClellan 1-Day OB/OS Oscillators remain in neutral territory (All Exchange: -19.26 NYSE: -14.91 NASDAQ: -22.06).
- The % of SPX issues trading above their 50 DMAs dipped to 56% but remains neutral as well.
- The Open Insider Buy/Sell Ratio (page 9) dipped to a neutral 52.3 as insiders again eased up on their buying activity from when the markets were recently deeply oversold.
- The detrended Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders was unchanged at a neutral 0.85. The shedding of their leveraged long exposure going into the correction we believe to be encouraging, Again, in our view, as such activity on their part is common after the bulk of a correction has already been expressed.
- This week’s contrarian AAII Bear/Bull Ratio rose to 1.06 as the crowd became more nervous, remaining neutral. The Investors Intelligence Bear/Bull Ratio (24.7/49.4) (contrary indicator page 9) is still neutral although the number of bullish advisors declined as bears increased.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dipping to $215.16 for the SPX. As such, the SPX forward multiple is 21.7 with the “rule of 20” finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.61%.
- The 10-year Treasury yield dropped to 1.49%. We view support at 1.35% and resistance at 1.53%.
In conclusion, the increase in volatility over the past few sessions, while unnerving, has not been sufficient to alter our near-term “neutral/positive” macro-outlook for equities given our interpretation of the messages coming from the charts and data.
SPX: 4,609/4,715
DJI: 35,233/35,923
COMPQX: 15,268/15,812
NDX: 15,888/16,417
DJT: 15,480/16,540
MID: 2,741/2,845
RTY: 2,200/2,300
VALUA: 9,553/9,930