The major equity indexes closed mostly lower yesterday with only one managing to post a gain. Market internals were negative on the NYSE and NASDAQ with the NYSE seeing volumes rise as the NASDAQ’s dipped from the prior session.
All closed near the midpoints of their intraday ranges. However, the weakness left the near-term trends unchanged as all but two remain in near-term downtrends.
And while market breadth remains poor, the data remains generally neutral except for the investor sentiment readings (contrarian indicators) that show a high degree of fear remains present that should, at some point, have a positive influence on price action.
However, as things currently stand, we have yet to see enough evidence presented to suggest the current market correction has been fully expressed.
On the charts, the major equity indexes closed mostly lower yesterday with only the NDX posting a gain. Market internals were negative as all the indexes closed near the midpoints of their intraday ranges. While no support levels were violated, the near-term trends continue to be negative on all but the DJI and RTY that are neutral.
Bullish inverted head & shoulder patterns on the large cap indexes continue to appear to be developing, but are not conclusive at this point.
Market breadth remains weak with the cumulative advance/decline lines for the All Exchange and NASDAQ negative with the NYSE’s neutral. We did see bullish stochastic crossover signals generated on the DJT, MID, and RTY that offer a glimmer of hope.
Yet, in our opinion, they need to be validated by the charts to become actionable.
The data remains largely neutral except for the new investor sentiment data that shows an increase in crowd fear.
- The McClellan 1-Day OB/OS oscillators remain neutral (All Exchange: -39.04 NYSE: -32.59 NASDAQ: -43.02).
- The % of SPX issues trading above their 50 DMAs (contrarian indicator) slipped to 50%, remaining neutral.
- The Open Insider Buy/Sell Ratio also rose to 58.0, also staying neutral.
- The detrended Rydex Ratio (contrarian indicator) inched up to -0.25, but is also neutral versus its prior bullish implications near the March lows.
- This week’s AAII Bear/Bull Ratio (contrarian indicator) rose to a very bullish 1.62 as crowd fear intensified. Meanwhile, the Investors Intelligence Bear/Bull Ratio (contrary indicator) was 32.1/35.8, remaining bullish.
- The forward 12-month consensus earnings estimate from Bloomberg for the SPX rose to $235.76. As such, the SPX forward multiple stands at 18.6 with the “rule of 20” finding ballpark fair value at 17.1.
- The SPX forward earnings yield is now 5.37%.
- The 10-year Treasury yield closed higher at 2.86. We view resistance as 2.88% although it is far enough back on the charts that it may not be a very effective barrier. Support is 2.41%.
In conclusion, while extremely negative investor sentiment suggests a positive forecast, the charts and bulk of the data have yet to shift enough to suggest the current correction has been completed.
SPX: 4,382/4,466 DJI: 34,086/34,759 COMPQX: 13,234/13,724 NDX: 13,833/14,321
DJT: 14,465/15,026 MID: 2,597/2,668 RTY: 1,980/2,040 VALUA: 9,323/9,496