With one exception, all the major indexes closed lower Monday with negative internals on the NYSE and NASDAQ as trading volumes declined on both from the prior session.
All but the Dow Jones Industrial Average, which was the only gainer, closed at or near their intraday lows as selling pressure persisted into the close. Some support levels were violated as some near-term trends also turned negative, with 50 DMAs broken as well. And while the charts weakened, the 1-day McClellan OBOS Oscillators are only mildly oversold, with the rest of the data neutral aside from the investor sentiment readings showing a decent amount of fear remains in the mix.
As such, the post-March rally correction that we assumed likely continued with a lack of evidence that would be strong enough to suggest that it has been completed with a high degree of probability.
On the charts, all the major equity indexes, except for the DJT, closed lower yesterday with a negative breadth and up/down volume on the NYSE and NASDAQ.
Several negative technical events were registered as the S&P 500, COMPQX, NDX, and RTY closed below support as the DJI and VALUA joined them in closing below their 50 DMAs.
The damage was sufficient to leave all in near-term downtrends, except for the DJI and VALUA staying neutral. While the larger cap indexes may be forming “inverted head & shoulder” patterns that would prove beneficial, it is, in our opinion, too early to have confidence in their validity at this point. Meanwhile, market breadth remains negative for the cumulative advance/decline lines on the All Exchange, NYSE, and NASDAQ. Some stochastic readings are now quite oversold but have yet to generate actionable bullish crossover signals. The data finds the McClellan 1-Day OB/OS only mildly oversold despite the recent weakness (All Exchange: - 52.94 NYSE: -50.51 NASDAQ: -53.45).
The % of SPX issues trading above their 50 DMAs (contrarian indicator) is 51%, remaining neutral. The Open Insider Buy/Sell Ratio rose to 42.96 but also remains neutral. The detrended Rydex Ratio dipped to +0.02, also staying neutral versus its prior bullish implications near the March lows.
This week’s AAII Bear/Bull Ratio (contrarian indicator) slipped to 1.17 as the crowd became less cautious, leaving its forecast bullish. Meanwhile, the Investors Intelligence Bear/Bull Ratio is now 31.0/39.1, remaining very bullish.
Bloomberg's forward 12-month consensus earnings estimate for the SPX lifted to $235.03. As such, the SPX forward multiple stands at 18.8, with the “rule of 20” finding a fair ballpark value declining to 17.2. The SPX forward earnings yield is now 5.33%.
The 10-year Treasury yield closed higher at 2.78 and above resistance. While we view new resistance as 2.88%, it is far enough back on the charts that it may not be very effective. Support is raised to 2.41%. In conclusion, the consolidation of the March rally continued with still no signs generated at this stage to suggest it has been completed