Insiders Step Up To The Buy Window
All the major equity indexes closed lower Tuesday with negative internals on the NYSE and NASDAQ as trading volumes declined from the prior session. However, only one of the indexes saw a shift in trend as the rest were left intact with several support levels being tested successfully.
While market breadth for the NASDAQ deteriorated, the rest of the data saw some improvement with one of the OB/OS Oscillators moving beck into oversold territory while psychology moved in an encouraging direction as the crowd became more cautious as insiders stepped up to the buy window.
As such, the consolidation we had been anticipating may have occurred while psychology improved to the point that we now feel it appropriate to shift our “neutral” near-term macro-outlook for equities to “neutral/positive” while selectivity may likely continue.
On the charts, all the major equity indexes closed lower yesterday with negative internals on the NYSE and NASDAQ as volumes dipped from the prior session.
- The only technical event of import registered was the DJT closing below support as well as its recent downtrend line, thus turning negative.
- The SPX, DJI, COMPQX and NDX that remain in uptrends successfully tested support while closing at their uptrend lines.
- The MID and VALUA remain neutral with the DJT and RTY) negative.
- Market breadth finds the cumulative advance/decline lines for the All Exchange and NYSE neutral with the NASDAQ’s turning negative.
- Stochastic levels remain severally overbought but no bearish crossover have been registered thus far.
The data finds all the McClellan 1-Day OB/OS for the NASDAQ oversold with the others staying neutral (All Exchange: -46.27 NYSE: -34.78 NASDAQ: -53.33).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders remains bearish, lifting to 1.39 as they continue their leveraged long exposure.
- However, this week’s contrarian AAII bear/bull ratio (27.3/35.67) and Investors Intelligence Bear/Bull Ratio at 16.7/53.1(contrary indicator) improved, both seeing a drop in bulls and rise in in bears as the crowd became more fearful.
- As well, the Open Insider Buy/Sell Ratio finally saw insiders finally step up to the buy window at 45.3, a notable improvement in our opinion.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $201.66 for the SPX.
- As such, the SPX forward multiple is 21.8 with the “rule of 20” finding fair value at approximately18.8.
- The SPX forward earnings yield is 4.58%.
- The 10-year Treasury yield closed at 1.23. We view support to be 1.13% and resistance a6t 1.3%.
In conclusion, yesterday’s decline resulted in only some slight damage while the psychology data shifted to the point worthy of our altering our near-term macro-outlook form “neutral” to “neutral/positive” as the consolidation we were expecting may have come to pass. However, selectivity may persist.
SPX: 4,350/NA DJI: 34,580/NA COMPQX: 14,544/NA NDX: 14,800/NA
DJT: 14,100/14,905 MID: 2,628/2,691 RTY: 2,120/2,225 VALUA: 9,145/9,550