1-Day McClellan OB/OS Oversold
All of the indexes closed lower Wednesday with negative internals on the NYSE and NASDAQ as trading volumes rose on both exchanges from the prior session. The charts saw most of the indexes break below their near term support levels, remaining in downtrends. The data is mixed with the 1 day McClellan OB/OS levels oversold and suggesting a possible bounce. Yet while valuation has continued to improve, the landscape created by the charts and data continues to suggest we maintain our near term “neutral/negative” outlook for the major equity indexes.
On the charts, all of the indexes closed lower yesterday with negative internals on the NYSE and NASDAQ on rising trading volume.
- The SPX (page2), DJI (page 2), COMPQX (page3), NDX (page 3), DJT (page 4) and MID (page 4) all closed below their near term support levels.
- However, late day trading saw the SPX, COMPQX, NDX an MID close near their intraday highs that might imply a short term bottom.
- With that said, all of the indexes are below their high “volume at price” levels, with the exception of the SPX, that suggest limited upside.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain in downtrends with all now below their 50 DMAs.
- As stated previously, the stochastic levels are oversold but can remain so for extended periods
The data is mixed.
- The 1-day McClellan OB/OS Oscillators are oversold and suggesting a possible bounce, in our opinion (All Exchange:-77.88 NYSE:-82.27 NASDAQ:-79.93).
- The detrended Rydex Ratio (-0.52), Open Insider Buy/Sell Ratio (80.0) and % of SPX stocks above their 50 DMAs (29.9) are all neutral.
- Crowd sentiment remains neutral with the AAII Berar/Bull Ratio at 32.67/32.0.
- However, the Investors Intelligence Bear/Bull Ratio (contrary indicator) remains negative at 17.2/49.5 suggesting advisors remain overly bullish.
- The 12-month forward consensus earnings estimate from Bloomberg for the SPX dipped to $171.22, leaving the forward p/e at a 16.3 multiple while the “rule of twenty” finds fair value at 17.8 suggesting the SPX is undervalued. Of course, that is based on the assumption that said estimates will hold. The earnings yield stands at 6.15%.
In conclusion, while the OB/OS data suggests some possibility of a near term reprieve, the rest of the information suggests we maintain our near term “neutral/negative” outlook for the major equity indexes.