Cumulative Market Breadth Turns Negative
The major equity indexes closed lower Wednesday with negative internals on the NYSE and NASDAQ as trading volumes declined from the previous session. Most closed at or near their intraday lows as late session buying failed to appear. Two of the index charts shifted their near-term trends lower, leaving the charts in a mix of bullish, neutral and bearish near-term trends.
However, the DJI closed at its intermediate term uptrend from March, suggesting a possible bounce. Cumulative market breadth deteriorated as well with all now short term negative while some bearish stochastic crossover signals were also generated.
Regarding the data, it is mostly neutral except for the Detrended Rydex Ratio still showing the leveraged ETF traders staying leveraged long and cautionary. We remain near-term “neutral” in our macro-outlook for equities.
On the charts, the major equity indexes closed lower yesterday with negative internals on lighter trading volume. Most closed near their lows of the session.
- Technical events occurred with the MID closing below its near-term uptrend line and is now neutral while the RTY closed below support and is now in a near-term downtrend.
- As such, we find the near-term trends positive on the COMPQX, NDX, and VALUA, while the RTY is negative and the rest neutral.
- We would also note the DJI closed at its intermediate term uptrend line that has been in effect since March, suggesting potential upside over the near-term for that index.
- Cumulative market breadth took a hit as yesterday’s poor breadth pushed the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ into negative trends.
- The SPX, MID, and VALUA registered bearish stochastic crossovers.
The data finds the McClellan 1-Day OB/OS still in neutral territory (All Exchange: -38.43 NYSE: -42.53 NASDAQ: -36.52).
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders was unchanged at 1.25 and remains inside bearish territory as they continue their extended leveraged long exposure.
- The Open Insider Buy/Sell Ratio was unchanged as well at 32.7 and remains neutral.
- This week’s contrarian AAII Bear/Bull Ratio (0.65) remained neutral as does the Investors Intelligence Bear/Bull Ratio (22.3/56.5) (contrary indicator).
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifted to $214.33 for the SPX. As such, the SPX forward multiple is 21.9 with the “rule of 20” finding fair value at approximately 18.4.
- The SPX forward earnings yield is 4.57%.
- The 10-year Treasury yield closed at 1.6%. We view resistance at 1.68% and support at 1.57%.
In conclusion, while the futures indicate a positive open, the status of the charts and data suggest we maintain our near-term “neutral” macro-outlook for equities.
SPX: 4,620/4,717A DJI: 35,904/36,203 COMPQX: 15,598/16,020 NDX: 15,975/16,380
DJT: 16,000/16,915 MID: 2,872/2,907 RTY: 2,360/2,400 VALUA: 9,937/10,151
All charts courtesy of Worden
S&P 500
Dow Jones Industrials
NASDAQ Composite
NASDAQ 100
Dow Jones Transports
S&P Midcap 400
Russell 2000
