Participation Remains Selective
The major equity indexes closed mostly higher Tuesday with negative internals on the NYSE while the NASDAQ’s were positive. Most closed at or near their intraday highs with all but one posting new closing highs. Yet while the cumulative advance/decline lines remain positive, market participation remains selective, in our opinion, as discussed below.
The data dashboard has become a bit more mixed but not all that threatening. As such, we are maintaining our near-term macro-outlook for equities at “neutral” due to the selective nature of the advances.
On the charts, the major equity indexes closed mostly higher yesterday with only the VALUA posting a loss.
- As well, the VALUA was the only index unable to post a new closing high.
- Internals were positive on the NASDAQ but negative on the NYSE.
- All the indexes are in near-term uptrends.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are positive and above their 50 DMAs. However, we would note as we review approximately 1800 stock charts on a daily basis, it appears to us that market participation remains selective. Not all boats are rising with the tide.
- The DJT generated a bearish crossover signal but is not yet actionable, in our view.
The data finds the McClellan 1-Day OB/OS Oscillators are mostly neutral with only the NASDAQ remaining slightly overbought (All Exchange: +41.32 NYSE: +33.78 NASDAQ: +53.09).
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.25 but remains in bearish territory as they remain leveraged long.
- The Open Insider Buy/Sell Ratio dipped to 36.7 but remains neutral.
- This week’s contrarian AAII Bear/Bull Ratio (29.67/41.53) remains neutral with the increase in bulls as does The Investors Intelligence Bear/Bull Ratio (23.8/48.9) (contrary indicator).
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dropping back to $214.14 for the SPX. As such, the SPX forward multiple is 21.6 with the “rule of 20” finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.62%.
- The 10-year Treasury yield closed lower at 1.55%. Its uptrend remains intact with resistance at 1.70% and support at 1.47%.
In conclusion, we remain “neutral” in our near-term macro-outlook for equities primarily due to the selectivity of market participation we observe when we take a more granular look in our daily review of approximately 1800 individual stocks.
SPX: 4,551/NA DJI: 35,485/NA COMPQX: 15,327/NA NDX: 15,426/NA
DJT: 16,000/NA MID: 2,779/NA RTY: 2,360/NA VALUA: 9,707/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 Futures
