McClellan 1-Day OB/OS Remain Neutral
The major equity indexes closed mostly lower Monday with negative internals on the NYSE while the NASDAQ saw negative breadth but positive up/down volume as overall trading volumes rose on both exchanges from the prior session.
The day ended with no technical events of significance being registered on the charts, leaving them in a mix of bullish and neutral near-term trends. Cumulative breadth was little changed as well while the bulk of the data is also in neutral territory.
In our opinion, the most important action yesterday occurred with the yield on the 10-year Treasury closing above what we viewed as resistance at 1.3% to 1.32%. We will continue to monitor the 10-year as higher rates could impact the equity markets. For now, however, we are maintaining our near-term “neutral/positive” macro-outlook for equities.
On the charts, the major equity indexes closed mostly lower yesterday with negative NYSE internals while the NASDAQ’s were mixed.
- No support or resistance levels were violated, leaving the chart trends unchanged. The SPX, DJI, COMPQX and NDX are still in near-term uptrends with the rest neutral.
- The only event worth noting was the VALUA closing back below its 50 DMA.
- Cumulative market breadth was unchanged as well with the NYSE cumulative A/D positive and the All-Exchange and NASDAQ neutral.
- No stochastic signals were generated.
The data continues to send a generally neutral message, in our opinion.
- All the McClellan 1-Day OB/OS oscillators remain in neutral territory (All Exchange: +6.66 NYSE: -0.08 NASDAQ: +11.61).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.08 but remains bearish.
- Meanwhile, the Open Insider Buy/Sell Ratio lifted to 37.1 as insiders did some buying. However, it remains in its neutral range.
- This week’s contrarian AAII bear/bull ratio (28.8/34.29) and Investors Intelligence Bear/Bull Ratio at 16.3/54.1 (contrary indicator) saw little movement, leaving the AAII neutral and the II bearish.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $205.32 for the SPX. As such, the SPX forward multiple is 21.6 with the “rule of 20” finding fair value at approximately 18.7.
- The SPX forward earnings yield is 4.63%.
- The 10-year Treasury yield closed at 1.32% and above our prior resistance level of 1.3%. While it is a fractional violation, it is, nonetheless, a violation of resistance that warrants shifting our implied resistance level to 1.4% with support at 1.23%. Whether this is enough to have some influence over the equity markets has yet to be seen.
In conclusion, despite the move on the 10-year, there was not enough evidence presented yesterday to cause a change in our current near-term “neutral/positive” macro-outlook for equities.
SPX: 4,389/NA DJI: 34,862/NA COMPQX: 14,585/NA NDX: 14,868/NA
DJT: 14,243/14,701 MID: 2,667/2,729 RTY: 2,190/2,280 VALUA: 9,415/9,704