All the major equity indexes closed higher yesterday with negative internals on the NYSE while the NASDAQ’s were positive. Both saw an increased trading volume from the prior session.
All closed at or near their highs of the day. However, no violations of resistance or trends were achieved, leaving all but the DJT in near-term downtrends. Two of the indexes appear to have generated “hammer” signals, suggesting they may have seen their lows established.
What we find particularly interesting was the shift in sector activity as the hot commodity related stocks took a portable hit while growth names saw strength. This is the exact opposite of what has transpired over the past several sessions.
The data remains somewhat neutral except for the new investor sentiment readings (contrarian indicators) that continue to find the crowd very negative in their expectations. So, while we pulled our “correction complete” opinion yesterday morning, the close gave a little support for that possibility. However, more progress is needed, in our opinion.
On the charts, all the major equity indexes closed higher yesterday with negative NYSE internals and the NASDAQ’s positive. After mid-session weakness, the indexes rallied to their intraday highs, leaving all in the plus category.
However, there were no violations of resistance or near-term trend. As such, all remain in near-term downtrends except the DJT that is neutral.
We would note the MID and VALUA, after sizable intraday losses, closed near their highs and positive, suggesting “hammer” formations that imply a washout of sellers.
The market’s strength was unable to move the needle on cumulative breadth that remains negative for the All Exchange, NYSE, and NASDAQ. No stochastic signals were generated.
The data finds the McClellan 1-Day OB/OS oscillators somewhat oversold for the All Exchange and NYSE while the NASDAQ OB/OS slipped back to neutral (All Exchange: -50.41 NYSE: -59.5 NASDAQ: -41.25).
- The % of SPX issues trading above their 50 DMAs (contrarian indicator) was unchanged at 41%, remaining neutral.
- The Open Insider Buy/Sell Ratio dropped to 41% but remains neutral as well.
- The detrended Rydex Ratio (contrarian indicator) rose to -0.41 and is back in neutral territory.
- This week’s AAII Bear/Bull Ratio (contrarian indicator) was unchanged at a very bullish 1.62 as the crowd continues to be quite fearful. The Investors Intelligence Bear/Bull Ratio (contrary indicator) was 32.1/35.8, also unchanged and bullish. Such high levels of fear have typically resulted in being upside catalysts over the years once the markets start to improve.
- The forward 12-month consensus earnings estimate from Bloomberg for the SPX rose slightly to $236.46. Thus, the SPX forward multiple is 18.2 with the “rule of 20” finding ballpark fair value at 17.2.
- The SPX forward earnings yield is now 5.5%.
- The 10-year Treasury yield closed lower at 2.83. We view resistance as 3.0%. Support is 2.5%.
In conclusion, yesterday’s reversal from notable losses to gains on all the indexes was a welcome event, although not quite enough to put our “correction completed” opinion back on the table. Yet, it does offer some encouragement. The shift from commodities to growth is of interest as well.
SPX: 4,254/4,403 DJI: 33,665/34,248 COMPQX: 12,839/13,2350 NDX: 13,265/13,832
DJT: 14,900/15,621 MID: 2,569/2,615 RTY: 1,930/1,990 VALUA: 9,084/9,363