Insiders Continue Buying
The major equity indexes closed mixed Wednesday with positive internals on the NYSE and NASDAQ as trading volumes declined on both exchanges from the prior session. The charts saw a few shifts in trend as a result.
Meanwhile, there was some slight improvement in cumulative breadth while the McClellan OB/OS Oscillators are all in neutral territory. Investor psychology saw a bit of an improvement as well with corporate insiders continuing their recent buying activity.
As such, we see no cause to alter our current “neutral/positive” macro-outlook for equities, although we continue to focus on the degree of selectivity in market advance participants.
On the charts, the major equity indexes closed mixed yesterday with positive internals on the NSYE and NASDAQ as trading volumes declined.
- The charts saw some shifts in trend with the SPX and DJI closing below their near-term uptrend lines and are now neutral versus their prior positive trends.
- On the other hand, the RTY managed to close above its near-term downtrend line and is now neutral versus negative.
- As such, the COMPQX and NDX are in near-term uptrends with the DJT staying negative.
- The rest of the indexes are in neutral.
- Market breadth saw some minor improvement with the NASDAQ cumulative A/D turning neutral from negative after making a higher low. It is causing us to consider the possibility that some life may be coming back into the small cap area. The NYSE and All Exchange A/Ds remain neutral.
- No stochastic signals were generated.
The data finds all the McClellan 1-Day OB/OS in neutral territory (All Exchange: -11.4 NYSE: -12.35 NASDAQ: -10.2).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders remains bearish but dipping to 1.29 as they lightened their leveraged long exposure slightly.
- This week’s contrarian AAII bear/bull ratio (27.3/35.67) and Investors Intelligence Bear/Bull Ratio at 16.7/53.1(contrary indicator) improved, both seeing a drop in bulls and rise in in bears as the crowd became more fearful.
- The Open Insider Buy/Sell Ratio finally saw insiders continuing to participate on the buy side, lifting to at 49.9. This is a notable improvement, in our opinion, versus their absence over the past several weeks.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg at $201.69 for the SPX. As such, the SPX forward multiple is 21.8 with the “rule of 20” finding fair value at approximately18.7.
- The SPX forward earnings yield is 5.04%.
- The 10-year Treasury yield closed at 1.26. We view support to be 1.13% and resistance at 1.3%.
In conclusion, the improvement recently seen in the psychology data combined with insider buying and slight improvement in market breadth suggests we maintain our current “neutral/positive” near-term macro-outlook for equities with the caveat that selectivity remains a factor.
SPX: 4,350/NA DJI: 34,580/NA COMPQX: 14,544/NA NDX: 14,800/NA
DJT: 14,100/14,905 MID: 2,628/2,691 RTY: 2,120/2,225 VALUA: 9,145/9,550