All Data Neutral
All of the major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ as overall trading volumes declined from those of the prior session. Some of the charts saw technical improvements. However, all remain in short term downtrends. The data is neutral across the board as the previous OB/OS oversold conditions have been removed. So while valuation still suggests some appeal, the activity in the charts and data have yet to reach levels that would cause us to alter our current near term “neutral/negative” outlook for the major equity indexes.
On the charts, all of the indexes closed higher Friday with positive internals, although trading volumes declined.
- Improvements were seen on the SPX (page 2), COMPQX (page 3) and NDX (page 4) as they closed above their near term resistance levels.
- As well, the SPX, DJI (page 2) and NDX closed above their 50 DMAs.
- Yet the picture still has some notable clouds, in our opinion, as said improvements were achieved, as all of the indexes remain in short term downtrends as noted by the red down sloping lines on the charts.
- We would also note that overall trading volumes have been fairly substantial of late on declines while rally moves have occurred on lesser and decreasing volumes suggesting distribution even within last week’s bounce.
- Breadth improved slightly with the All Exchange and NYSE cumulative advance/decline lines turning neutral from negative while the NASDAQ’s remains negative.
- High “volume at price” (VAP) levels are supportive on the SPX, DJI and NDX but the rest are resistant.
- In short, the indexes are notably split in terms of performance.
The data has turned neutral including all of the 1-day McClellan OB/OS Oscillators (All Exchange:-28.55 NYSE:-24.54 NASDAQ:-33.1). The lion’s share of that fuel has now been spent, in our opinion.
- The detrended Rydex Ratio (contrary indicator) is a neutral +0.09 as is the % of SPX stocks trading above their 50 DMAs at 50.1.
- Last week’s AAII Bear/Bull Ratio (contrary indicators) remained neutral at 30.33/32.30 with the Investor’s Intelligence Bear/Bull Ratio (contrary indicator) bearish at 16.8/55.1.
- The Open Insider Buy/Sell Ratio is also neutral at 62.9. Valuation seems appealing with forward 12-month earnings estimates for the SPX at $175.04 via Bloomberg, leaving the forward p/e at a 16.9 multiple while the “rule of twenty” finds fair value at 18.5.
- The 10-Year Treasury yield stands at 1.52%.
- The earnings yield is 5.93%.
In conclusion, while the last two sessions brought a bounce with some chart improvements, all of the short term trends remain negative as trading volumes have suggested distribution within said bounce and oversold conditions have now been relieved. As well, with the index performances split, we are maintaining our near term “neutral/negative” outlook for the major equity indexes.