All McClellan 1-Day OB/OS Oscillators Remain Neutral
All the major equity indexes closed higher with positive internals on the NYSE and NASDAQ as trading volumes dipped from the previous session.
The bulk of the indexes closed at or near their intraday highs with a number of positive technical events occurring on the charts, including the COMPQX and NDX making new all-time closing highs.
Cumulative market breadth remains neutral while the valuation gap has narrowed a built over the past several sessions. The data, with the exception of investor psychology, is sending a generally neutral message.
Thus, the charts and data continue to suggest we maintain our current near-term “neutral/positive” macro-outlook for equities in place.
On the charts, all the major equities closed higher yesterday with positive internals on the NYSE and NASDAQ as trading volumes dipped from Monday’s levels. Most closed at or near their intraday highs. Positive technical events occurred as follows.
- Both the COMPQX and NDX made new all-time closing highs.
- The DJI and VAUA closed above their near-term downtrend lines and are now neutral versus their prior negative trend.
- The SPX closed above resistance and is back in a near-term uptrend while the DJI and DJT gave bullish stochastic crossover signals.
- The net result finds the near-term trends bullish for the SPX, COMPQX and NDX with the DJI and VAUA neutral as the rest are still in near-term downtrends.
- Market breadth was little changed with the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ staying neutral but above their 50 DMAs.
Looking at the data, the McClellan 1-Day OB/OS Oscillators that suggested a bounce Monday morning are now neutral and not yet threatening, in our opinion (All Exchange: -23.4 NYSE: -32.03 NASDAQ: -15.62).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.21 but remains in bearish territory.
- This week’s contrarian AAII bear/bull ratio (22.23/41.8) was little changed and remains mildly bearish as does the Investors Intelligence Bear/Bull Ratio (contrary indicator) at a bearish 16.3/54.
- The Open Insider Buy/Sell Ratio lifted to 24.3 but remains bearish as well.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $192.22 for the SPX. As a result, the SPX forward multiple now stands at 22.1 with the “rule of 20” finding fair value at 18.5.
- The SPX forward earnings yield is 4.53%%.
- The 10-year Treasury yield dipped to 1.47. We view support at 1.4% and resistance at 1.55%. The 10-year yield remains in a downtrend from its March peak that we view as a positive for equities in general.
In conclusion, we have yet to see enough of a shift in the weight of the evidence to alter our near-term “neutral/positive” macro-outlook for equities.
SPX: 4,192/4,255 DJI: 33,174/34,248 COMPQX: 13,910/NA
NDX: 13,974/NA
RTY: 2,225/2,295 VALUA: 9,386/9,695