The major equity indexes closed mixed yesterday with positive NYSE internals while the NASDAQ’s were negative. Trading volumes declined from the prior session on both exchanges. No significant technical events happened on the charts other than the COMPQX bouncing off of its long-term uptrend line as commented on in yesterday’s note. So far, the holding of said trend is a positive. Yet, no changes were seen in the mix of neutral and negative near-term trends. The data is largely neutral and yielding no strong near-term implications. Forward 12-month earnings estimates for the SPX, however, continued to lift. As such, in our opinion, no evidence as presented yesterday that was sufficient to alter our near-term “neutral/positive” macro-outlook for equities.
On the charts, the indexes closed mixed yesterday with positive NYSE internals as the NASDAQ’s were negative.
- The MID (page 4), RTY (page 5) and VALUA (page 5) posted gains as the remainder ended with losses.
- The chart events of note were the COMPQX (page 3) bouncing off of its long-term uptrend line from November 2020 while the VALUA (page 56) closed back above its 50 DMA. However, the DJI (page 2) closed below support.
- As of the close, we would view the COMPQX”S successful test of long-term support as a plus.
- The stochastic levels did flash bearish crossovers on the SPX (page 2), DJI (page 2) MID and VALUA.
- Cumulative breadth saw no changes in the current negative trends on the All Exchange and NASDAQ with the NYSE neutral.
The data finds the McClellan 1-Day OB/OS Oscillators still neutral (All Exchange: +2.55 NYSE: +16.81 NASDAQ: -8.43).
- The % of SPX issues trading above their 50 DMAs lifted to 68% and remains neutral.
- The Open Insider Buy/Sell Ratio (page 9) slipped to 40.8 and remains neutral as well.
- Meanwhile, the detrended Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders lifted slightly to 0.97, also staying neutral.
- This week’s contrarian AAII Bear/Bull Ratio dropped to 1.12 but remained bullish as the crowd remains skeptical of the recent rally. 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 lifting to $222.30 for the SPX. As such, the SPX forward multiple is 21.1 with the rule of 20” finding ballpark fair value at 18.3.
- The SPX forward earnings yield is 4.73%.
- The 10-year Treasury yield rose to 1.73%. We view support for the 10-Year at 1.55% with resistance at 1.75%.
In conclusion, as the market’s try to stabilize from the panic earlier this week, current investor sentiment, improved valuation, the neutral data and successful tests of long-term uptrends suggest we maintain our current “neutral/positive” macro-outlook for equities.
SPX: 4,694/4,477
DJI: 35,922/36,300
COMPQX: 15,000/15,510
NDX: 15,740/16,033
DJT: 16,213/16,765
MID: 2,777/2,866
RTY: 2,180/2,200
VALUA: 9,837/9,985