Data Remains Mixed
The major equity indexes closed lower yesterday in a volatile session after the release of the FOMC meeting notes. However, the initial selloff saw some buying interest near the close that pared losses from the intraday lows. Nonetheless, some of the index charts suffered technical damage as others held, leaving the near-term trends a mix of negative, neutral and bullish.
Cumulative market breadth weakened slightly while the data remains a mix of neutral and negative readings. So, while yesterday’s action was a bit of a roller coaster ride, we believe that our speculation of market rotation is ongoing, supported by yesterday’s diverse index response. We are maintaining our current near-term “neutral/positive” macro-outlook for equities.
On the charts, the major equity indexes closed lower yesterday with negative internals on the NYSE with the NASDAQ having negative breadth but positive up/down volume as trading volumes rose on both exchanges.
However, the impact of the volatility was not equal across the board as some indexes broke while others held.
- On the negative side, the SPX closed below its near-term uptrend line and is now neutral while the DJI closed below support and its 50 DMA. The MID closed below its 50 DMA as well.
- However, the COMPQX, NDX VALUA, and RTY tested their near-term uptrend lines successfully while closing nicely above their intraday lows with no violations o0f support.
- So, the trends are now near-term negative on the DJI & DJT, neutral for MID and SPX and positive on the rest.
- Cumulative breadth weakened to neutral on the NYSE and NASDAQ but remains positive on the All Exchange with all staying above their 50 DMAs.
- No stochastic signals were generated.
On the data, the McClellan 1-Day OB/OS Oscillators remain neutral (All Exchange: -2.97 NYSE: -16.84 NASDAQ: +7.94).
- The Rydex Ratio measuring the action of the leveraged ETF traders dipped to 1.51 but remains in bearish territory.
- This week’s contrarian AAII bear/bull ratio (22.31/40.24) turned mildly bearish as bears declined while bulls increased as was the case also for the Investors Intelligence Bear/Bull Ratio at 16.2/54.5 that remains on a bearish signal.
- The Open Insider Buy/Sell Ratio edged up to 20.7 but remains bearish as they have yet to so any important buying interest.
- Valuation continues to appear extended with the forward 12-month consensus earnings estimate from Bloomberg of $191.76 for the SPX. The SPX forward multiple is 22.0 with the “rule of 20” finding fair value at 18.4. The valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
- The SPX forward earnings yield is 4.54%%.
- The 10-year Treasury yield rose to 1.57 and above what we saw as resistance at 1.55%. We now view support at 1.5% and resistance at 1.6%. We would note the 10-year yield remains in a near-term downtrend form its late March peak. We continue to believe the moves in the 10-year yield may well have the greatest influence over the near-term action on the equity indexes.
SPX: 4,200/4,250 DJI: 33,770/34,576 COMPQX: 13,805/NA
NDX: 13,821/NA
RTY: 2,275/2,365 VALUA: 9,543/NA