Data Remains Largely Neutral
All the major equity indexes closed higher Friday except for the RTY posting a minor loss. In fact, the SPX managed to post a new closing high. However, the advances occurred with negative breadth that weakened the NYSE cumulative advance/decline line as trading volumes declined from the prior session. As such, most of the indexes remain in near-term neutral trends. The data remains largely neutral with some modest improvements. Thus, in our view, the charts and data suggest we maintain our near-term “neutral/positive” macro-outlook for equities for the present.
On the charts, all the major equity indexes closed higher Friday except the RTY (page 5) posting a loss. Yet internal breadth was negative. Volumes declined on the NYSE and NASDAQ from the prior session.
- Technical events occurred on the SPX (page 2) positing a new closing high while the DJI (page 2) closed above resistance. The fact that the advances occurred on negative breadth and lighter volume, in our opinion, leaves those achievements somewhat less robust as would otherwise be the case.
- The near-term chart trends were unchanged with the SPX and DJI positive and the rest neutral.
- The poor breadth on the day weakened the NYSE cumulative advanced/decline line to neutral from positive, joining the All Exchange and NASDAQ in that condition.
- No stochastic signals were generated.
Looking at the data, the McClellan 1-Day OB/OS Oscillators dipped but remain in neutral territory (All Exchange: -23.76 NYSE: -15.43 NASDAQ: -29.48).
- The % of SPX issues trading above their 50 DMAs rose to 60% but remains neutral as well.
- The Open Insider Buy/Sell Ratio (page 9) saw an uptick to 57.0 as insiders again increased their buying activity yet also remains in neutral territory.
- The detrended Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders rose to a neutral 0.91.
- Last week’s contrarian AAII Bear/Bull Ratio rose to 1.06 as the crowd became more nervous, remaining neutral. The Investors Intelligence Bear/Bull Ratio (24.7/49.4) (contrary indicator page 9) is still neutral although the number of bullish advisors declined as bears increased.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $215.62 for the SPX. As such, the SPX forward multiple rose to 21.9 with the “rule of 20” still finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.58%. The 10-year Treasury yield was unchanged at 1.49%. We view support at 1.35% and resistance at 1.53%.
In conclusion, the achievements on the SPX and DJI are somewhat contained by the fact that they occu5red with negative market breadth. However, the charts and data that guide us through the markets suggest we keep our near-term “neutral/positive” macro-outlook for equities in place.
SPX: 4,633/NA
DJI: 35,319/36,159
COMPQX: 15,268/15,812
NDX: 15,888/16,417
DJT: 15,480/16,540
MID: 2,741/2,845
RTY: 2,200/2,300
VALUA: 9,553/9,930