McClellan 1-Day OB/OS Oscillators Remain Neutral
The major equity indexes closed mostly lower Tuesday with negative internals on the NYSE and NASDAQ as trading volumes rose on both exchanges from the prior session.
While two of the indexes posted new closing highs, the degree of selectivity in market participants to the upside narrowed further as the new closing highs were achieved on notably negative breadth on the NASDAQ.
Meanwhile, one index broke support and is now in a near-term downtrend, leaving the chart trends a mix of bullish, neutral and bearish projections.
The data, however, remains generally neutral, including the 1-Day McClellan OB/OS Oscillators, while forward 12-month consensus earnings estimates for the SPX from Bloomberg continue to lift.
So, even with the selectivity on the rise, we are leaving our near-term “neutral/positive” macro-outlook for equities intact.
On the charts, the only indexes managing to post gains yesterday were the COMPQX and NDX, both posting new closing highs as the rest declined.
- Market internals were negative on the NYSE and NASDAQ as trading volumes rose. In our opinion, the weak market breadth with some new closing highs being achieved suggests further evidence of a narrowing of market participation as discussed in yesterday’s note.
- Other than the new closing highs, the only other technical event of import was the RTY closing below support that turned its near-term trend to negative from neutral.
- So, we find the near-term trends bullish on the SPX, DJI, COMPQX and NDX, negative for the RTY and neutral on the rest.
- Market breadth saw some weakening as well with the cumulative advance/decline line for the NASDAQ turning negative from neutral, The All-Exchange A/D remains neutral with the NYSE’s positive.
- No stochastic signals were generated at the close.
The data finds the McClellan 1-Day OB/OS Oscillators still neutral (All Exchange: -37.6 NYSE: -28.07 NASDAQ: -44.18).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders rose to 1.46, moving deeper into bearish territory.
- This week’s contrarian AAII bear/bull ratio (23.9/43.37) turned neutral from mildly bearish while the Investors Intelligence Bear/Bull Ratio (contrary indicator) remains bearish at 16.2/59.6.
- The Open Insider Buy/Sell Ratio was unchanged at 29.2 and remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $198.95 for the SPX. As a result, the SPX forward multiple dipped to 21.8 with the “rule of 20” finding fair value at approximately18.6.
- The SPX forward earnings yield is 4.58%.
- The 10-year Treasury yield closed at 1.37 and below support. We see new support as 1.35% and resistance at 1.5%. The 10-year yield remains in a downtrend from its March peak that we view as a positive for equities in general regarding valuation.
In conclusion, while the number of issues being able to participate to the upside has continued to narrow, our disciple continues to suggest we maintain our current “neutral/positive” macro-outlook for equities.
SPX: 4,251/NA DJI: 34,500/NA COMPQX: 14,356/NA
NDX: 14,137/NA DJT: 14,602/15,181 MID: 2,614/2,713
RTY: 2,180/2,225 VALUA: 9,536/9,807