Data Remains Mostly Neutral
All but one of the major equity indexes posted gains yesterday, the exception being the DJT. All closed at or near their intraday highs with positive internals on both the NYSE and NASDAQ. More new closing highs were achieved while cumulative market remained unchanged and neutral. The near-term chart trends continue to be mixed while the data is still sending a generally neutral message except for some of the psychology data suggesting a potential excess of bullish expectations. The net result was nothing appeared on the charts or data to warrant a change in our current “neutral/positive” macro-outlook for equities at this time.
- On the charts, the only index to post a loss yesterday was the DJT (page 4).
- The rest posted gains with the SPX (page 2), DJI (page 2), COMPQX (page 3) and NDX (p[age 3) making new closing highs on positive market internals.
- The only other technical event of import was the MID (page 4) managing to climb back above its 50 DMA.
- So, the near-term trends are unchanged with the SPX, DJI, COMPQX and NDX in near-term uptrends, the MID, RTY and VALUA neutral and the DJT negative.
- Cumulative breadth remains neutral and above the 50 DMA for the All Exchange, NYSE and NASDAQ.
- No stochastic signals were generated.
The data finds all the McClellan 1-Day OB/OS still in neutral territory (All Exchange: -18.28 NYSE: -11.11 NASDAQ: -22.88).
- The Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders was unchanged and remains bearish at 1.29.
- This week’s contrarian AAII bear/bull ratio (23.33/43.07) moved back into mildly bearish territory while the Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) saw a decline in bears and a lift in bulls, remaining bearish at 15.5/60.8. It suggests an excess of bullish expectations, in our opinion.
- The Open Insider Buy/Sell Ratio saw an uptick to 28.6 and remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg at $199.07 for the SPX. As a result, the SPX forward multiple is 22.0 with the “rule of 20” finding fair value at approximately18.6. The SPX forward earnings yield is 4.54%.
- The 10-year Treasury yield closed flat at 1.36. We view support as 1.2% and resistance at 1.44%. The 10-Year Yield remains in a downtrend from its March peak that we view as a positive for equities regarding the valuation gap.
In conclusion, the mix of trends on the charts combined with the OB/OS levels, market breadth, valuation and other data suggest we maintain our “neutral/positive” near-term macro-outlook for equities. However, investor psychology still suggests a potential overly optimistic view on their part.
DJI: 34,570/NA
COMPQX: 14,356/NA
NDX: 14,485/NA
DJT: 14,247/14,905
RTY: 2,180/2,225
VALUA: 9,461/9,672