Breaking News
Investing Pro 0
Donate to earthquake relief efforts in Turkey and Syria Donate

More Consolidation Likely

By Guy S. Ortmann, CMTStock MarketsDec 31, 2021 02:10PM ET
www.investing.com/analysis/more-consolidation-likely-200613292
More Consolidation Likely
By Guy S. Ortmann, CMT   |  Dec 31, 2021 02:10PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
NDX
-1.58%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US500
-0.93%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DJI
-0.46%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
RTYH3
-1.44%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
IXIC
-1.44%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
US10Y...
-0.42%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Insider Buy/Sell Ratio: Rydex Ratio Weakens Further

The major equity indexes closed mostly lower Thursday. However, in contrast to recent sessions, market internals were actually positive on the NYSE and NASDAQ as trading volumes rose from the prior session. Nonetheless, most closed near their lows of the day, with three of the charts ending below their near-term uptrend lines and are now neutral versus their prior positive slopes. The data is mixed but the Insider Buy/Sell Ratio:Detrended Rydex Ratio deteriorated a bit further. As such, while we maintain our near-term macro-outlook for equities at “neutral/positive, the charts data and valuation suggest some further consolidation of the recent rally gains is more likely before further progress may be seen.

On the charts, the indexes closed mostly lower yesterday, but internals were positive on the NYSE and NASDAQ as trading volumes rose from the prior session.

  • Despite the positive internals, however, the S&P 500, Dow Jones Industrial Average and Russell 2000 Futures closed below their near-term uptrend lines and are now neutral versus their previous bullish implications.
  • So, we now find the NASDAQ Composite, Nasdaq 100 and S&P Midcap 400 positive with the rest neutral.
  • Cumulative market breadth remains neutral on the NASDAQ and all exchange with the NYSE’s still positive.
  • The stochastic levels remain overbought but have yet to generate bearish crossover signals.

Looking at the data, the McClellan 1-Day OB/OS Oscillators remain neutral on the all exchange and NASDAQ, while the NYSE’s remains overbought (All Exchange: +45.34 NYSE: +65.33 NASDAQ: +31.57).

  • The percentage of SPX issues trading above their 50 DMAs dipped to 68% and remains neutral but near the upper end of its range for the year.
  • The Open Insider Buy/Sell Ratio dropped to 36.8 but also remains neutral.
  • Meanwhile, the detrended Rydex Ratio measuring the action of the leveraged ETF traders rose to 1.32 and remains bearish. In our view, this shift in the Insider/Rydex dynamic may be worth noting.
  • This week’s contrarian AAII Bear/Bull Ratio dipped to 1.23 but remains bullish as the crowd remains nervous and unwilling to embrace recent market strength. But the Investors Intelligence Bear/Bull Ratio (24.4/55.0) did a total flip flop from the prior week as bulls now outweigh bears yet remains neutral.
  • Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dropping to $216.03 for the SPX. As such, the SPX forward multiple is 22.1 and near peak 2021 levels with the “rule of 20” still finding fair value at approximately 18.5.
  • The SPX forward earnings yield is 4.52%. We would note the forward estimates for the SPX may lift next week as has been the case throughout the past year as a new forward quarter is added.
  • The 10-year Treasury yield dipped to 1.52%. We view support at 1.38/% and resistance at 1.58%.

In conclusion, we remain “neutral/positive” in our near-term macro-outlook for equities while the charts, data and valuation suggest some further consolidation of recent gains may be more likely.

SPX: 4,694/NA
DJI: 35,960/NA
COMPQX: 15,510/15,983
NDX: 16,300/16,607
DJT: 15,983/16,524
MID: 2,777/2,866
RTY: 2,200/2,250
VALUA: 9,678/9,972

More Consolidation Likely
 

Related Articles

More Consolidation Likely

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email