Data Remains Largely Neutral
All the major equity indexes closed lower Thursday with negative internals on the NYSE and NASDAQ as volumes declined on both. Most closed at or near their intraday lows with one index closing below support.
The action left the bulk of the indexes in near-term downtrends with only two in neutral patterns. While a couple of bullish stochastic crossovers were generated on the charts, the data remains largely neutral and lacking any strong implications that the correction from the March rally highs has been completed.
So, while some of the index charts have caught our attention regarding possible bullish “inverted head & shoulders” patterns, there has yet to be enough evidence presented to imply said current correction has been exhausted.
On the charts, all the major equity indexes closed lower Thursday with negative internals on the NYSE and NASDAQ on lighter trading volumes. Sellers stayed in control into the close leaving all but the DJT at or near their intraday lows.
On the negative side, the NDX closed below support while the SPX closed back below its 50 DMA. So, the near-term trends remain bearish on all but the DJI and VALUA which are neutral.
Slight positives are coming from bullish stochastic crossovers being registered on the DJI and VALUA. Market breadth remains less than optimal, however, with the cumulative advance decline lines for the All Exchange and NYSE as the NASDAQ’s remains negative.
The data remains largely neutral and lacking any strong signals regarding near-term market direction.
- The McClellan 1-Day OB/OS oscillators are all neutral (All Exchange: -22.79 NYSE: -18.22 NASDAQ: -25.3).
- The % of SPX issues trading above their 50 DMAs (contrarian indicator) slipped to 51%, remaining neutral.
- The Open Insider Buy/Sell Ratio also dipped to 50.8, also staying neutral.
- The detrended Rydex Ratio (contrarian indicator) declined to -0.29, but is also neutral versus its prior bullish implications near the March lows.
- Last week’s AAII Bear/Bull Ratio (contrarian indicator) slipped to 1.17 as the crowd became a bit less cautious, leaving its forecast as bullish. Meanwhile the Investors Intelligence Bear/Bull Ratio (contrary indicator) was 31.0/39.1, remaining very bullish.
- The forward 12-month consensus earnings estimate from Bloomberg for the SPX rose to $235.45. As such, the SPX forward multiple stands at 18.7 with the “rule of 20” finding ballpark fair value at 17.2.
- The SPX forward earnings yield is now 5.36%.
- The 10-year Treasury yield closed higher at 2.83. 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, the correction from the March rally highs has yet to show important signs of abating. Other than the bullish stochastic crossovers noted above and investor sentiment remaining fearful, there has yet to be enough of a shift in the weight of the evidence to imply said correction is complete.
Also, the potentially bullish inverted head & shoulders patterns need further development to suggest their signals have a high degree of validity.
SPX: 4,382/4,490 DJI: 34,086/34,759 COMPQX: 13,234/13,965 NDX: 13,833/14,321
DJT: 14,465/15,177 MID: 2,597/2,668 RTY: 1,980/2,040 VALUA: 9,323/9,9493