Data Remains Neutral
All of the major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ on heavy trading volume although some closed at or near their intraday lows. Several of the index charts saw their near term trends turn neutral from negative as others failed to achieve that performance. Some 50 DMAs were reclaimed as well. The data continues to be dominated by neutral readings. However, even with Friday’s action, we are maintaining our near term “neutral/negative” outlook for the major equity indexes for reasons discussed below.
On the charts, all of the major equity indexes closed higher Friday with positive internals on heavy trading volume although several closed near their intraday lows as last hour trading saw an influx of selling pressure.
- Nonetheless, the SPX (page 2), DJI (page 2), COMPQX (page 3), NDX (page 4) and DJT (page 5) all managed to close above their near term resistance as well as their near term downtrend lines, turning those trends to neutral.
- While the MID (page 4), and VALUA (page 5) managed to close above resistance as well, they were unable to violate their trend lines which remain negative.
- The RTY (page 4) was unable to generate any technical events of note.
- So the trends are now a mix of neutral and negative, with some speculating the bifurcation is a result of large cap stock buybacks.
- The cumulative advance/decline lines turned positive on the NYSE, NASDAQ and All Exchange with high “volume at price” (VAP) levels seen as supportive on the SPX, DJI and NDX while resistant on the rest.
The data remains neutral including all of the 1-day McClellan OB/OS Oscillators (All Exchange:+14.5 NYSE:+14.16 NASDAQ:+16.88).
- The detrended Rydex Ratio (contrary indicator) is a neutral -0.61 as is the % of SPX stocks trading above their 50 DMAs at 60.2%.
- Last week’s AAII Bear/Bull Ratio (contrary indicators) remains neutral at 33.0/28.33. However, the Investor’s Intelligence Bear/Bull Ratio (contrary indicator) remained bearish at 17.1/55.3 suggesting an excess of bullish sentiment on the part of investment advisors.
- The Open Insider Buy/Sell Ratio is also neutral at 54.4.
- Valuation seems appealing, although a bit less so, with forward 12 month earnings estimates for the SPX dipping to $174.47 via Bloomberg, leaving the forward p/e at a 17.0 multiple while the “rule of twenty” finds fair value at 18.3.
- The 10-Year Treasury yield stands at 1.75%.
- The earnings yield is 5.87%.
In conclusion, while last week saw some strength reenter the markets, the end result left a mixture of neutral and negative near term trends on the charts. With the strong influence of trade war headlines contradicting each other on an almost daily basis, we are maintaining our near term “neutral/negative” outlook for the major equity indexes intact for the present.