COMPQX And NASDAQ 100 Reach “Return Lines”
The major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ as NYSE volumes dipped and NADSDAQ volumes rose from the prior session. All but one of the indexes made new closing highs as all remain in near-term uptrends. However, as noted below, both the COMPQX and NDX have reached their “return lines” that have presaged some digestion of gains four times since the March lows of this year.
In our opinion, they suggest some tempering of enthusiasm may be appropriate for the near-term. The data is mixed but generally neutral in nature. Given current conditions, we are maintaining our near-term “neutral” macro-outlook for equities.
On the charts, the major equity indexes closed higher Friday with positive internals on both the NYSE and NASDAQ.
- Only the DJT was unable to post a new closing high.
- All the indexes remain in near-term uptrends.
- However, a closer look at the COMPQX and NDX shows both having reached their “return lines” that, since March, have been followed by periods of digestion of gains as noted on the NDX chart. In our opinion, the fact that said return lines have been consistent pullback levels over the past several months suggests some better buying opportunities may lie ahead as tests of uptrend lines may be forthcoming.
- Cumulative market breadth remains positive on the All Exchange, NYSE and NASDAQ.
- No stochastic signals were generated as of the close on Friday.
The data finds the McClellan 1-Day OB/OS only the NASDAQ still in overbought territory as the others remain neutral (All Exchange: +49.82 NYSE: +49.11 NASDAQ: +52.09).
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.16 but remains in bearish territory as they continue their leveraged long exposure.
- The Open Insider Buy/Sell Ratio dipped to 35.7 as insiders did a bit of selling but remains neutral.
- Last week’s contrarian AAII Bear/Bull Ratio (29.67/41.53) remained neutral with the increase in bulls as did the Investors Intelligence Bear/Bull Ratio (23.8/48.9) (contrary indicator).
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dipping to $214.25 for the SPX. As such, the SPX forward multiple is 21.9 with the “rule of 20” finding fair value at approximately 18.6.
- The SPX forward earnings yield is 4.56%.
- The 10-year Treasury yield closed lower at 1.45% and below support. As such, we view resistance at 1.54% and support at 1.39%.
In conclusion, we remain “neutral” in our near-term macro-outlook for equities as the COMPQXS and NDX charts suggest some retracement of recent gains is becoming more likely post the recent rally.
SPX: 4,620/NA DJI: 35,904/NA COMPQX: 15,641/NA NDX: 15,975/NA
DJT: 16,842/NA MID: 2,852/NA RTY: 2,350/NA VALUA: 9,937/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
