Some McClellan 1-Day OB/OS Oscillators Oversold
All the major equity indexes closed lower Friday with broadly negative internals and heavy trading volumes due to options expiration. All but two of the indexes closed below support and are now in near-term negative trends and below their 50 DMAs as all closed at or near their intraday lows.
However, some of the data is suggesting a bit of bounce in the markets may be forthcoming when the McClellan 1-day OB/OS Oscillators and the percentage of SPX stocks trading above their 50 DMAs are taken into consideration.
As such, we have reason to suspect the recent slide in the indexes may be closer to a near-term low and a poor exit point, at least for the near-term. Thus, we are inclined to maintain our current near-term “neutral/positive” macro-outlook for equities.
On the charts, all the major equities closed lower Friday with very negative internals and heavy volume with all closing art or near their lows of the day.
- All but two of the indexes closed below support and their 50 DMAs. So, the SPX, DJI, DJT, MID, RTY and VALUA are now in near-term downtrends and below their 50 DMAs.
- In contrast, the COMPQ and NDX held support, closed above their 50 DMAs and remain in short-term uptrends. Their action, in our opinion, adds further support to our speculations regarding market rotation as stated in our comments over the past several sessions.
- On the negative side, the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are now negative and below their 50 DMAs.
- Stochastic levels, however, are very oversold and offer some hope although bullish crossovers have yet to appear.
- Of possible import is the percentage of SPX stocks trading above their 50 DMAs slid down to 30.5%. While one might think that to be a negative, it is at levels that has been coincident with market lows over the past two years only with the exception of March 2020 when COVID rocked the markets.
The McClellan 1-Day OB/OS Oscillators are now oversold on the All Exchange and NYSE, also suggesting bounce potential (All Exchange: -55.89 NYSE: -80.51 NASDAQ: -36.55).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.19 but remains in bearish territory.
- Last week’s contrarian AAII bear/bull ratio (22.31/40.24) turned mildly bearish as bears declined while bulls increased as was the case also for the Investors Intelligence Bear/Bull Ratio (contrary indicator) at 16.2/54.5 that remains on a bearish signal.
- The Open Insider Buy/Sell Ratio was unchanged at 20.9 and remains bearish.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $191.96 for the SPX.
- The SPX forward multiple dropped to 21.7 with the “rule of 20” finding fair value at 18.6 as the overvaluation gap narrowed.
- The SPX forward earnings yield is 4.61%%.
- The 10-year Treasury yield dropped to 1.45. We now view support at 1.4% and resistance at 1.56%. The 10-year Yield has been in a downtrend since its March peak that we view as a positive for equities in general.
SPX: 4,162/4,200 DJI: 33,174/34,248 COMPQX: 13,805/NA
NDX: 13,821/NA DJT: 14,242/15,181 MID: 2,580/2,650
RTY: 2,225/2,295 VALUA: 9,386/9,695