Data Not Yet sending Bottoming Signals
The major equity indexes closed lower Friday with positive internals on the NYSE and negative internals on the NASDAQ as trading volumes declined on both. Two indexes closed below their near-term support levels leaving the charts in a mix of neutral & negative near-term trends. Market breadth remains rather weak while the data has yet to suggest the recent correction has been completed, given the McClellan OB/OS levels. Yet, while the futures are indicating another negative open, the rapidity and steepness of the recent downdraft has us on the outlook for evidence that the waters have calmed, and the bulk of the storm has passed.
On the charts, all the indexes closed lower Friday with positive NYSE and negative NASDAQ internals.
- The growth stocks continued to suffer with the SPX (page 2), COMPQX (page 3) and NDX (page 3) closing below support. As well, the COMPQX closed below its long-term uptrend line that cast yet another technical cloud.
- The VALUA (page 5) closed below its 50 DMA.
- The action left the SPX, COMPQX and NDX in near-term downtrends with the rest neutral.
- There was no shift in the market’s cumulative breadth with the All Exchange and NASDAQ A/Ds negative and the NYSE neutral as all remain below their 50 DMAs.
- A minor ray of hope is coming from the stochastic levels for the COMPQX and NDX that are now oversold. However, they need to be confirmed by the charts.
The data finds the McClellan 1-Day OB/OS Oscillators still neutral and not yet suggesting an oversold bounce (All Exchange: -1.13 NYSE: +16.58 NASDAQ: -14.73).
- The % of SPX issues trading above their 50 DMAs dipped to 64% and remains neutral.
- The Open Insider Buy/Sell Ratio (page 9) slipped to 36.8 and remains neutral as well.
- Meanwhile, the detrended Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders also dipped slightly to 0.95, also staying neutral.
- Last week’s contrarian AAII Bear/Bull Ratio dropped to 1.12 but remained bullish as the crowd remains skeptical of the markets. The Investors Intelligence Bear/Bull Ratio (24.4/55.0) (contrary indicator page 9) was unchanged and remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg slipping to $222.10 for the SPX. As such, the SPX forward multiple is 21.1 with the rule of 20” finding ballpark fair value at 18.2 as a result in the rise of the 10 Year Treasury yield.
- The SPX forward earnings yield is 4.75%.
- The 10-year Treasury yield rose to 1.77% and above resistance. We now view support for the 10-Year at 1.60% with resistance at 1.85%.
In conclusion, the charts and data, as of Friday’s close, had little to offer regarding implications that the recent slide in the market has been completed. However, given the dept and velocity of the declines, we are keeping our eyes open for said bottom signals as valuations have improved.
SPX: 4,654/4,718
DJI: 35,922/36,300
COMPQX: 14,877/15,087
NDX: 15,561/15,902
DJT: 16,213/16,765
MID: 2,777/2,866
RTY: 2,180/2,200
VALUA: 9,837/9,985