Most Resistance Levels Violated
McClellan 1-Day OB/OS Mildly Overbought
All the major equity indexes closed higher Thursday with positive internals on the NYSE and NASDAQ as trading volumes declined from the prior session. Almost every index closed above its near-term resistance level as the SPX managed to make a new closing high while some others saw their near-term trends violated to the upside.
However, when looking at the data, the recent market strength has pushed the 1-Day McClellan OB/OS Oscillators into slightly overbought conditions as the rest became a bit more mixed. Thus, in our view, the charts and data continue to suggest we maintain our near-term macro-outlook for equities at “neutral/positive.”
On the charts, all the major equity indexes closed higher Thursday with positive internals on the NYSE and NASDAQ.
- Every index, with the exception of the DJT, closed above resistance as the SPX managed to post a new all-time closing high.
- As well, the DJI saw its near-term trend turn positive from neutral while the DJT closed above its near-term downtrend line and shifted to neutral from negative.
- As such, the SPX and DJI trends are positive with the remainder neutral.
- Cumulative market breadth remains neutral and below the 50 DMA on the All Exchange, NYSE and NASDAQ advance/decline lines.
- No stochastic signals were generated.
Looking at the data, McClellan 1-Day OB/OS Oscillators moved into mildly overbought territory as a result of the recent market strength (All Exchange: +52.46 NYSE: +54.33 NASDAQ: +50.33).
- The % of SPX issues trading above their 50 DMAs rose to 60% and remains neutral.
- The Open Insider Buy/Sell Ratio dipped to 52.6, yet remains neutral.
- As well, the detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped slightly but remains bearish at 1.15. They are back in leveraged long exposure.
- Last week’s contrarian AAII Bear/Bull Ratio rose to 1.38 as the crowd became more nervous and continued its bullish implications. Bears now widely outnumber bulls. The Investors Intelligence Bear/Bull Ratio (25.3/39.8) (contrary indicator) was still neutral, but the number of bearish advisors rose significantly to 44.2% versus its prior 25.3% level. So, the sentiment indicators remain a bit encouraging.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dipping to $216.16 for the SPX. As such, the SPX forward multiple is 21.9 with the “rule of 20” still finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.57%.
- The 10-year Treasury yield rose to 1.49%. We view support at 1.38% and resistance at 1.58%.
In conclusion, the charts and data, in our opinion, suggest we maintain our near-term macro-outlook for equities at “neutral/positive.”
SPX: 4,672/NA DJI: 35,436/36,195 COMPQX: 15,274/15,683 NDX: 16,059/16,400
DJT: 15,484/16,277 MID: 2,747/2,821 RTY: 2,200/2,250 VALUA: 9,636/9,855