McClellan 1-Day OB/OS Oscillators Back To Neutral
The major equity indexes closed mixed Monday with negative internals on the NYSE while the NASDAQ saw negative breadth but positive up/down volumes as overall trading volumes rose from the previous session on both exchanges. At the close, three of the major indexes made new all-time closing highs, suggesting the market rotation previously discussed in our comments continued. The chart trends remain mixed while the data saw a drop in the OB/OS Oscillators back to neutral as some of the psychology data turned a bit more cautionary. The net result is our discipline suggests not enough weight has been shifted on the scales to alter our current “neutral/positive” macro-outlook for equities at present.
On the charts, the major equity indexes closed mixed yesterday with negative internal on the NYSE and mixed internals on the NASDAQ as trading volumes declined.
- On the plus side, the SPX made another new closing high while the COMPQX and NDX did likewise after closing above their near-term resistance levels. The rest of the indexes close lower.
- The comparative strength of the SPX, COMPQX and NDX continues to suggest a continuation of market rotation back into growth as speculated here recently.
- The near-term trends are positive on the SPX, COMPQX, NDX, RTY and VALUA with the DJT negative and the DJI and MID neutral.
- The cumulative advance/decline lines remain positive on the All Exchange, NYSE and NASDAQ while no stochastic crossover signals were generated during the session.
On the data, the McClellan 1-Day OB/OS Oscillators all returned to neutral (All Exchange: +36.65 NYSE: +22.09 NASDAQ: +48.5).
- However, the Rydex Ratio measuring the action of the leveraged ETF traders rose to 1.55 and is now in very bearish territory.
- This week’s contrarian AAII bear/bull ratio (22.31/40.24) turned mildly bearish as bears declined while bulls increased as was the case also for the Investors Intelligence Bear/Bull Ratio at 16.2/54.5 that remains on a bearish signal.
- The Open Insider Buy/Sell Ratio edged up to 18.8 but remains bearish as insider buying interest remains absent.
- Valuation continues to appear extended with the forward 12-month consensus earnings estimate from Bloomberg of $191.76 for the SPX. The SPX forward multiple is 22.2 with the “rule of 20” finding fair value at 18.5. The valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
- The SPX forward earnings yield is 4.51%%.
- The 10-year Treasury yield rose to 1.5%. We view support at 1.4% with resistance at 1.55%. We continue to believe the moves in the 10 Year yield may well have the greatest influence over the near-term action on the equity indexes.
In conclusion, we remain near-term “neutral/positive” in our macro-outlook for equities.
DJI: 34,395/34,740
COMPQX: 13,805/NA
NDX: 13,821/NA
DJT: 15,087/15,553
RTY: 2,275/2,365
VALUA: 9,543/NA