Charts And Data Reveal Some Cracks
All of the indexes closed lower Wednesday with negative internals on the NYSE and NASDAQ as volumes declined on the NYSE from the prior session while those on the NASDAQ rose. The charts saw a bit of deterioration as discussed below while the data is starting to see some potential cautionary signs appear as well. So with the state of the charts and data combined with valuation, we are now shifting our near term outlook for the major equity indexes from “neutral/positive” to “neutral”.
On the charts, all of the indexes closed lower yesterday with negative internals as notable selling pressure appeared in the last hour of trading.
- All closed at or near their intraday lows.
- Some negative events occurred as the DJT (page 4) closed below support, turning its near term trend to negative from neutral.
- Both the COMPQX and NDX gave bearish stochastic crossovers as the NDX closed below its short term uptrend line that shifts its trend to neutral.
- The MID (page 4) also broke its uptrend like the NDX with the same shift in trend.
- So we now find the SPX (page 2), COMPQX (page 3) and RTY (page 5) in uptrends with the DJT (page 4) negative and the rest neutral.
- he NASDAQ cumulative advance/decline line has turned neutral as well.
The data remains largely neutral but with one psychology data point turning cautionary.
- All of the 1-day McClellan OB/OS Oscillators remain neutral (All Exchange:-29.66 NYSE:-30.51 NASDAQ:-30.94).
- The Open Insider Buy/Sell Ratio remains neutral at 48.5 as is the % of SPX stocks trading above their 50 DMAs with a 64.4% reading.
- However, crowd sentiment data has now turned more cautionary with the detrended Rydex Ratio (0.85) moving into bearish territory as is the Investors Intelligence Bear/Bull Ratio at 18.4/53.4. The AAII Bear/Bull Ratio (20.33/36.67) remains neutral.
- The 12 month forward consensus earnings estimate from Bloomberg for the SPX now stands at $171.77, leaving the forward p/e at a 17.0 multiple while the “rule of twenty” finds fair value at 17.5. As such, the SPX is very near fair value by this metric. The earnings yield stands at 5.87%.
In conclusion, we now are of the opinion that there has been enough of a shift in the charts and data, as discussed above, to alter our near term outlook for the major equity indexes from “neutral/positive” to “neutral”.