McClellan 1-Day OB/OS Oscillators Remain Neutral
The major equity indexes closed mostly lower Tuesday, with one exception, on negative internals for the NYSE and NASDAQ as NYSE volumes dipped and NASDAQ volumes rose from the prior session. The one technical event of note was the DJI closing below near-term support that shifted its short-term trend to negative from neutral, leaving the chart trends mixed. While market cumulative breadth remains positive, the psychology data continues to be of some concern that is, in our opinion, somewhat counterbalanced by the neutral McClellan OB/OS Oscillator readings. As such, we are maintaining our near-term “neutral/positive” macro-outlook for equities ahead of today’s release of the FOMC meeting notes.
On the charts, the major equity indexes closed mostly lower yesterday with negative internals on the NYSE and NASDAQ.
- The only index posting a gain was the DJT (page 4) that remains in a near-term downtrend.
- It was joined by the DJI that closed below its near-rem support level and is now near-term negative as well.
- The MID (page 4) is neutral with the rest of the indexes still in near-term uptrends.
- Despite yesterday’s negative breadth, the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain positive and above their 50 DMAs.
- The VALUA (page 5) did flash a bearish stochastic crossover signal which we will monitor closely.
On the data, the McClellan 1-Day OB/OS Oscillators remain neutral (All Exchange: +14.98 NYSE: +8.29 NASDAQ: +20.87).
- However, the Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders rose further to 1.6 and is now deeper into very bearish territory.
- This week’s contrarian AAII bear/bull ratio (22.31/40.24) turned mildly bearish as bears declined while bulls increased as was the case also for the Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) at 16.2/54.5 that remains on a bearish signal.
- The Open Insider Buy/Sell Ratio edged up to 20.1 but remains bearish as signs of notable insider buying interest have yet to appear.
- Valuation continues to appear extended with the forward 12-month consensus earnings estimate from Bloomberg of $191.76 for the SPX.
- The SPX forward multiple is 22.1 with the “rule of 20” finding fair value at 18.5. The valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
- The SPX forward earnings yield is 4.51%%.
- The 10-year Treasury yield was unchanged 1.5% despite the FOMC jitters. We view support at 1.4% with resistance at 1.55%. We continue to believe the moves in the 10 Year yield may well have the greatest influence over the near-term action on the equity indexes.
In conclusion, we remain near-term “neutral/positive” in our macro-outlook for equities while the FOMC comments may present some volatility for the markets when released at 2:00 today.
DJI: 34,138/34,576
COMPQX: 13,805/NA
NDX: 13,821/NA
DJT: 15,087/15,553
RTY: 2,275/2,365
VALUA: 9,543/NA