No Resistance Levels Violated
All the major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ as trading volumes declined from Thursday’s weak session. All closed at or near their highs of the day with two managing to close above their near-term downtrend lines. However, while some resistance levels were tested, none were able to be violated, leaving said resistance intact. As such, the near-term trends on the index charts remain a mix of neutral and negative projections.
The data remains generally neutral in its implications. On a positive note, the forward 12-month consensus earnings estimates from Bloomberg saw a nice uptick as Q4 2022 estimates were added. Yet, even with the EPS improvement, the charts and data have yet to suggest a shift from our current “neutral/negative” near-term macro-outlook for equities is warranted.
On the charts, all the major equity indexes closed higher Friday with positive internals on lighter volume for the NYSE and NASDAQ.
- All closed near their highs of the day with the MID and RTY closing above their near-term downtrend lines and are now neutral as is the VALUA.
- The rest remain in near-term bearish trends.
- The SPX and DJI tested their respective resistance levels but did not see enough demand to violate those levels. In our opinion, violations of resistance would be necessary to become more sanguine in our outlook.
- Regarding market breadth, while Friday’s numbers were positive, the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain negative and below their 50 DMAs.
- The SPX saw a bullish stochastic crossover registered but needs a violation of resistance to become actionable, in our view.
The data finds the McClellan 1-Day OB/OS Oscillators staying neutral (All Exchange: +4.93 NYSE: +5.09 NASDAQ: +4.64).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders rose to 0.92 and remains neutral versus its prior bearish implications as the ETF traders slightly increased their long exposure.
- The Open Insider Buy/Sell Ratio is still neutral, lifting to 34.0.
- Last week’s contrarian AAII Bear/Bull Ratio (35.23/30.4) and Investors Intelligence Bear/Bull Ratio (22.3/47.1) (contrary indicator) both saw a drop in bulls. They remain neutral but have suggested the crowd was starting to get nervous. New numbers for those data points will be released tomorrow.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $212.81 for the SPX, a notable increase. As such, the SPX forward multiple is 20.5 with the “rule of 20” finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.88%.
- The 10-year Treasury yield dipped to 1.47%. We see resistance at 1.55% with support around 1.38%.
In conclusion, Friday’s positive action was unfortunately, insufficient regarding the current messages coming from the charts and data. So although forward SPX earnings estimates have taken on a more positive glow, our disciple suggests we should keep our current near-term macro-outlook for equities at “neutral/.negative”.
SPX: 4,228/4,384 DJI: 33,600/34,539 COMPQX: 14,390/14,670 NDX: 14,540/14,920
DJT: 13,976/14,290 MID: 2,617/2,680 RTY: 2,200/2,280 VALUA: 9,361/9,590
All charts courtesy of Worden
S&P 500
Dow Jones Industrials
NASDAQ Composite
NASDAQ 100
Dow Jones Transports
S&P Midcap 400
Russell 2000 Futures
