Index Charts Continue Improvement
McClellan 1-Day OB/OS Mostly Overbought
All the major equity indexes closed higher Monday with positive internals on the NYSE and NASDAQ as trading volumes rose from the prior session. All closed at or near their intraday highs as the charts saw multiple violations of resistance as well as improvements in near-term trends. Also, cumulative market breadth turned positive.
However, while the charts marched forward, the data now finds the 1-day McClellan OB/OS Oscillators mostly overbought as stochastic levels are as well. Regarding investor sentiment, the crowd remains quite nervous according to the new AAII Bear/Bull Ratio. As such, we remain near-term “neutral/positive” in our macro-outlook for equities at this time.
On the charts, the indexes had a good day as all rose with positive internals on higher trading volume.
- As all closed at or near their intraday highs, virtually every index improved as all closed above their respective near-term resistance levels once again, except for the SPX that made a new closing high.
- The near-term trends turned to positive from neutral on the COMPQX, NDX, MID, and VALUA.
- The DJT managed to participate by also closing above its near-term downtrend line, turning neutral from negative.
- As a result, all the indexes are in near-term uptrends except for the DJT’s neutral tone.
- Cumulative market breadth saw some brightening as the A/Ds for the All Exchange, NYSE and NASDAQ turned positive from neutral.
- Stochastic levels are now overbought, but no bearish crossover signals have been generated thus far.
Looking at the data, McClellan 1-Day OB/OS Oscillators turned overbought on the All Exchange and NYSE, while the NASDAQ’s remained mildly overbought (All Exchange: +61.54 NYSE: +75.63 NASDAQ: +51.59).
- The % of SPX issues trading above their 50 DMAs rose to 63% and remains neutral.
- The Open Insider Buy/Sell Ratio was unchanged at 52.6 and also remains neutral.
- As well, the detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped slightly but remains bearish at 1.09.
- This week’s contrarian AAII Bear/Bull Ratio dipped to 1.23 but remains bullish as the crowd remains nervous and unwilling to embrace recent market strength. But the Investors Intelligence Bear/Bull Ratio (24.4/55.0) (contrary indicator) did a total flip flop from the prior week as bulls now outweigh bears yet remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg unchanged at $216.16 for the SPX. As such, the SPX forward multiple moved up to 22.2 with the “rule of 20” still finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.5%.
- The 10-year Treasury yield slipped to 1.48%. We view support at 1.38% and resistance at 1.58%.
In conclusion, we remain “neutral/positive” in our near-term macro-outlook for equities. We would note, however, forward valuation of the SPX appears a bit stretched while the McClellan OB/OS have become somewhat cautionary.
SPX: 4,694/NA DJI: 35,807/36,320 COMPQX: 15,510/15,983 NDX: 16,122/16,607
DJT: 15,983/16,524 MID: 2,777/2,866 RTY: 2,200/2,250 VALUA: 9,678/9,972