Cumulative Market Breadth Remains Neutral
The major equity indexes closed mixed Friday with negative internals on the NYSE while the NASDAQ’s were positive as NYSE volumes rose and NASDAQ volumes dipped from the prior session. Several new closing highs were registered on the more popular indexes. However, cumulative market breadth remains neutral, suggesting market participants have become more selective than the popular averages may imply.
The near-term chart trends for the indexes remain mostly positive with two still in neutral/sideways patterns. The data dashboard is sending generally neutral signals except for the contrarian detrended Rydex Ratio showing the leveraged ETF Traders leveraged long. So, while the indexes continue to rise, the number of boats rising with the tide versus those declining remains fairly evenly split. As such, we remain “neutral” in our near-term macro-outlook for equities.
On the charts, the major equity indexes closed mixed Friday with negative NYSE internals while the NASDAQ’s were positive.
- The DJT, RTY, and VALUA closed lower as the rest advanced.
- New closing highs were achieved on the SPX, DJI, COMPQX and NDX.
- The near-term chart trends remain positive on most except for the MID and RTY that are neutral.
- Friday’s action had no impact on cumulative market breadth that remains neutral on the All Exchange, NYSE and NASDAQ. As noted above, the A/Ds disclose market breadth is rather evenly split between gainers and losers that the more popular averages fail to disclose.
- No new stochastic signals were generated.
The data finds the McClellan 1-Day OB/OS Oscillator still neutral (All Exchange: +22.09 NYSE: +18.16 NASDAQ: +26.1).
- The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders moved deeper into bearish territory as they extended their leveraged long exposure to 1.26.
- The Open Insider Buy/Sell Ratio slipped back to neutral from negative at 29.1.
- Last week’s contrarian AAII Bear/Bull Ratio (32.13/36.97) turned neutral with the increase in bulls. The Investors Intelligence Bear/Bull Ratio (23.9/43.2) (contrary indicator) remained neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $217.91 for the SPX. As such, the SPX forward multiple is 21.1 with the “rule of 20” finding fair value at approximately 18.4.
- The SPX forward earnings yield is 4.73%.
- The 10-year Treasury yield closed lower at 1.56%. Its uptrend remains intact with resistance at 1.70% and support at 1.47%.
In conclusion, we remain “neutral” in our near-term macro-outlook for equities given the Rydex Ratio implications and the fact that market breadth is not as robust as the popular averages may suggest.
SPX: 4,525/NA DJI: 35,028/35,653 COMPQX: 15,153/NA NDX: 15,426/NA
DJT: 15,302/15,945 MID: 2,747/2,807 RTY: 2,250/2,300 VALUA: 9,646/9,880
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
