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More New Closing Highs Registered

By Guy S. Ortmann, CMTStock MarketsApr 19, 2021 09:35AM ET
www.investing.com/analysis/more-new-closing-highs-registered-200573900
More New Closing Highs Registered
By Guy S. Ortmann, CMT   |  Apr 19, 2021 09:35AM ET
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McClellan 1-Day OB/OS Oscillators Still Neutral

The major equity indexes closed higher Friday except for the DJTposting a loss. Internals were positive on the NYSE and negative on the NASDAQ as trading volumes rose above those of the prior session on both exchanges. The charts saw several new closing highs registered once again with all but one still in their short-term uptrends. One chart flashed a bearish stochastic crossover signal. The data still finds sentiment readings at cautionary levels. However, even with the recent market strength, the McClellan 1-Day OB/OS Oscillators remain benign and in neutral territory, suggesting the markets have not entered overbought territory. As such, we remain near-term “neutral/positive” in our macro-equity outlook given intact chart trends and lack of overbought conditions.

On the charts, the bulk of the equity indexes closed higher Friday with only the DJT (page 4) posting a loss.

  • Internals were positive on the NYSE and negative on the NASDAQ.
  • The SPX (page 2), DJI (page 2), NDX (page 3), MID (page 4) and VALUA (page 5) all made new closing highs.
  • All but the RTY (page 5), that is neutral, remain in near-term bullish trends and lacking sell signals.
  • Market breadth, however, remains split with the All Exchange and NYSE cumulative advance/decline lines positive and above their 50 DMAs while the NASDAQ’s is negative and below its 50 DMA.
  • Regarding stochastic readings, the DJT gave a bearish crossover signal Friday as the rest remain overbought.

The McClellan 1-DAY OB/OS oscillators are still neutral (All Exchange: +6.73 NYSE: +32.13 NASDAQ: -9.28) while the sentiment indicators remain cautionary.

  • Sentiment data still finds the Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders in bearish territory, lifting to 1.32 as the traders remain leveraged long.
  • Last week’s Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) was unchanged at a bearish 17.5/54.4 with the AAII a bearish 21.4/52.2 as bullish sentiment increased.
  • Of note, the Open Insider Buy/Sell Ratio is still bearish and unchanged at 15.9 as insiders remain largely on the sell side. As previously noted, this data point tends to be more effective in marking market lows versus tops, in our opinion.
  • Valuation still appears extended with the forward 12-month consensus earnings estimate from Bloomberg lifting to $182.85. This leaves the SPX forward multiple at 22.9 while the “rule of 20” finds fair value at 18.4. We reiterate the valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
  • The SPX forward earnings yield stands at 4.37%.
  • The 10-year Treasury yield rose to 1.57% and remains near what we see as support at 1.55%. We now view 1.63% as resistance versus our prior 1.75% level given last week’s action.

In conclusion, despite sentiment levels, the charts and OB/OS levels suggest we stay “neutral/positive” in our near-term macro-outlook for equities.

SPX: 4,080/NA

DJI: 33,545/NA

COMPQX: 13,846/14,100

NDX: 13,610/NA

DJT: 14,621/NA

MID: 2,633/NA

RTY: 2,225/2,280

VALUA: 9,176/NA

More New Closing Highs Registered
 

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