Some McClellan OB/OS Oscillators Remain Oversold
The major equity indexes closed mostly higher Thursday with the exception of the NDX posting a loss. Internals were positive on the NYSE and NASDAQ with NYSE volumes rising as the NASDAQ’s dipped from the previous session. One new closing high was generated on the charts, but the state of their near-term trends is largely unchanged in a mix of neutral, positive and negative. Cumulative breadth remains negative as well. The data finds the NYSE McClellan 1-day OB/OS Oscillator neutral while the All Exchange and NASDAQ remain oversold. The rest of the short-term data remains generally neutral. As such, our net takeaway from yesterday’s action suggests we maintain our current near-term “neutral” macro-outlook for the equity markets.
On the charts, the only index to close lower yesterday was the NDX (page 3). The rest posted gains with positive internals on the NYSE and NASDAQ.
- While internal breadth was positive, it was insufficient to alter the current negative cumulative breadth trends for the All Exchange, NYSE and NASDAQ.
- The only technical event of import was the DJT (page 4) closing above near-term resistance to a new closing high.
- As such, the DJT, SPX (page 2) and VALUA (page 5) are in short-term uptrends with the COMPQX (page 3) and RTY (page 5) negative. The remainder are neutral.
- The stochastic reading finally found some oversold conditions appear on the MID (page 4) and VALUA. However, bullish stochastic crossovers have yet to appear. The rest of the stochastic readings are neutral.
Regarding the data, the oversold McClellan 1-day OB/OS Oscillators finally managed to generate a bounce. The NYSE’s, however, is now neutral with the All Exchange and NASDAQ staying oversold (All Exchange: -60.89 NYSE: -47.52 NASDAQ: -70.47).
- The Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders remains neutral at 0.57.
- The Open Insider Buy/Sell Ratio is neutral as well at 30.7.
- This week’s Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) changed slightly to a mildly bearish 19.6/55.9 from its prior bearish level.
- Valuation still appears extended with the forward 12-month consensus earnings estimate from Bloomberg at $174.58, leaving the SPX forward multiple at 22.4 while the “rule of 20” finds fair value at 18.4. We reiterate 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 stands at 4.49%.
- The 10-year Treasury yield was unchanged at 1.61% but looks somewhat higher preopen. We continue to monitor it closely as it has been having rather significant influence on the equity markets of late.
In conclusion, yesterday’s general strength leaves the weight of the evidence, in our opinion, to suggest we keep our current near-term macro-outlook for equities at “neutral”.
DJI: 32,357/32,800
COMPQX: 12,759/13,186
NDX: 12,690/13,140
DJT: 13,932/NA
MID: 2,512/2,617
VALUA: 8,735/9,0953