Near-Term Macro-Outlook Remains “Neutral/Negative”
The major equity indexes closed mostly lower Friday with mixed internals on the NYSE while the NASDAQ saw negative breadth and negative up/down volume. The majority closed at or near their intraday lows. The one exception to the declines was the DJT that closed above resistance and is now in a near-term positive trend, in our opinion.
As such, the chart trends remain mixed while the data is generally neutral with the exception of insiders increasing their selling activity. Also of note was the rise in the 10-year Treasury yield to just shy of resistance as it continued to rise. The net result of Friday’s action suggests our near-term “neutral/negative” macro-outlook for equities remains appropriate.
On the charts, the only index to post a gain Friday was the DJT as it managed to close above resistance and is now in a near-term uptrend, in our view. The rest posted losses with generally negative internals on the NYSE and NASDAQ on lighter trading volume from the previous session.
- With the exception of the DJT, all closed at or near their intraday lows. So, we now find the chart trends positive on the DJT, negative on the COMPQX and NDX and neutral on the rest.
- Cumulative breadth for the markets remained neutral on the All Exchange, NYSE and NASDAQ as all remain below their 5-0 DMAs.
- No stochastic signals were generated.
The data finds the McClellan 1-Day OB/OS Oscillators remaining neutral (All Exchange: +5.88 NYSE: +15.37 NASDAQ: -0.61).
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders slipped further to 0.29, the lowest level of the past several months as their bullish expectations have waned from their excesses at the market’s highs as noted recently in our comments. As a contrarian indicator, it is an improvement within the psychology data.
- The Open Insider Buy/Sell Ratio, however, has changed its tune in the opposite direction and is now in bearish territory as insiders increased their selling activity to a 24.3 reading.
- Last week’s contrarian AAII Bear/Bull Ratio (39.73/26.8) turned mildly bullish as bearish sentiment increased while the bulls waned. That “crowd” is now nervous. The Investors Intelligence Bear/Bull Ratio (22.1/46.5) (contrary indicator) was little changed and remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $213.43 for the SPX. As such, the SPX forward multiple is 20.6 with the “rule of 20” finding fair value at approximately 18.4. The SPX forward earnings yield is 4.86%.
- Of note, the 10-year Treasury yield rose further to 1.61% and is now just shy of resistance at 1.62%. It continues to suggest higher rates forthcoming that could become an issue for equities, in our opinion. We see support at 1.47%.
In conclusion, Friday’s action left our near-term market concerns generally intact. As such, we are maintaining our near-term “neutral/negative” outlook for equities in place.
SPX: 4,300/4,427 DJI: 33,914/34,951 COMPQX: 14,292/14,670 NDX: 14,509/14,920
DJT: 14,256/14,731 MID: 2,624/2,723 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
