1-Day McClellan OB/OS Mostly Neutral
The indexes closed evenly split Tuesday with mixed internals on the NYSE and NASDAQ as overall trading volumes rose on both exchanges from the prior session. The NYSE saw positive breadth but negative up/down volume while the NASDAQ saw the opposite. No support or resistance levels were violated on the charts while one potentially cautionary signal was generated. The data remains largely neutral. As such, nothing occurred on the charts or data to warrant a shift from our current “neutral” outlook for the major equity indexes.
On the charts, the indexes closed evenly split yesterday with the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (page 3) posting gains as the rest declined.
- As noted above, internals were mixed.
- The only event of note was the NDX generating a “bearish crossover signal”. While it may not be actionable at this point, it does increase the technical potential for some retracement within that index, in our opinion.
- The SPX near term trend is neutral with the rest positive.
- The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive while the high “volume at price” (VAP) levels remain supportive.
The data is largely neutral.
- The 1-day McClellan OB/OS Oscillators are now neutral for the All Exchange and NYSE as the NASDAQ’s remains overbought(All Exchange:+46.15 NYSE:+37.74 NASDAQ:+59.25.
- The detrended Rydex Ratio (contrary indicator) is neutral at +0.35 as is the % of SPX stocks trading above their 50 DMAs at 71.7.
- Yesterday’s AAII Bear/Bull Ratio (contrary indicators) remained bullish at 37.33/29.0 with the Investor’s Intelligence Bear/Bull Ratio (contrary indicator) staying neutral at 17.9/50.0.
- The Open Insider Buy/Sell Ratio remains neutral at 38.1 but has been declining over the past week.
- The appearance of valuation looking appealing, assuming current estimates hold, has compressed with the 12-month forward consensus earnings estimate from Bloomberg for the SPX slipping to $171.37, leaving the forward p/e at a 17.5 multiple while the “rule of twenty” finds fair value at 18.2.
- We would note said earnings estimates have been declining over the past two weeks from $172.25 as the markets have moved higher.
- The 10-Year Treasury yield stands at 1.81%.
- The earnings yield is 5.7%.
In conclusion, the bearish stochastic crossover signal on the NDX slightly increases the potential for some pullback in that index, in our opinion. However, the rest of the data and charts continue to suggest we maintain our current near term “neutral” outlook for the major equity indexes.