NYSE McClellan 1-Day OB/OS Remain Overbought
The major equity indexes closed mixed Friday with positive internals on the NSYE and mixed internals on the NASDAQ. Trading volumes rose from the prior session. No major technical events occurred on the charts. However, Thursday’s action was technically significant. As we were not available to publish Friday morning, we think it appropriate to review Thursday’s action in today’s report given the events that occurred. The data is mixed. Yet, in spite of Thursday’s positive events, we are maintaining our near term outlook for the reasons discussed below.
On the charts, the indexes closed mixed Friday with the SPX (page 2), DJI (page 2) and VALUA (page 5) advancing as the rest declined.
- NYSE internals were positive while the NASDAQ saw negative breadth but positive up/down volume. It is Thursday’s action that warrants a review.
- At Thursday’s close, all of the indexes had advanced with the all but the RTY (page 5) closing above their near term resistance levels.
- As well, the SPX, DJI, COMPQX (page 3) and NDX (page 3) closed above their 50 DMAs pushing all into near term uptrends, with the exception of the RTY, from their prior neutral conditions.
- While that action was bullish, it also moved all of the stochastic levels into overbought territory. Said stochastic levels are one of the reasons we are keeping our near term neutral outlook in place as they imply potential for some retracement of the recent gains.
- High “volume at price” (VAP) levels are supportive on the SPX, DJI, COMPQX and NDX. They are resistant on the rest.
- The cumulative advance/decline lines are positive on the NYSE, NASDAQ and All Exchange.
The data has turned more mixed.
- All of the 1-day McClellan OB/OS Oscillators are now in overbought territory with the NASDAQ’s mildly so (All Exchange:+59.54 NYSE:+69.01 NASDAQ:+53.61). As such, like the stochastic readings, they imply retracement potential.
- The detrended Rydex Ratio (contrary indicator) turned bullish at -1.01 with the % of SPX stocks trading above their 50 DMAs at a neutral 55.8.
- Last Tuesday’s AAII Bear/Bull Ratio (contrary indicators) remained bullish at 41.67/25.0. It continues to be counterbalanced by the Investor’s Intelligence Bear/Bull Ratio (contrary indicator) as investment advisors remained somewhat overly optimistic at 18.7/43.9 .
- The Open Insider Buy/Sell Ratio remains neutral but dropped to 50.2.
- Valuation continues to appear appealing, assuming current estimates hold, with the 12-month forward consensus earnings estimate from Bloomberg for the SPX dipping to $171.96, leaving the forward p/e at a 17.3 multiple while the “rule of twenty” finds fair value at 18.5.
- The 10-Year Treasury yield is 1.55%.
- The earnings yield stands at 5.77%.
In conclusion, Thursday’s action was bullish but we are keeping our neutral outlook in place for the reasons discussed above