The major equity indexes closed mixed Wednesday with positive NYSE internals as the NASDAQ’s were negative. Both traded lighter volume than the previous session. The charts saw the SPX and NDX close above resistance; the only technical events of note.
The day left all the indexes in neutral trends with cumulative market breadth unchanged and mixed. The data remains nonthreatening with the McClellan 1-day OB/OS Oscillators staying neutral. However, we find the detrended Rydex Ratio (contrarian indicator) encouraging as it declined further, suggesting the usually wrong leveraged ETF traders remain wary of the recent rally. Thus, we remain near-term “positive” in our macro-outlook for equities.
On the charts, the major equity indexes closed evenly split between gainers and losers with positive NYSE and negative NASDAQ internals as volumes dropped from the prior session on both.
- The SPX, DJI, COMPQX, and NDX posted gains as the rest declined.
- Of note, both the SPX and NDX closed above resistance. However, all the action left the near-term trends unchanged and neutral across the board.
- Cumulative market breadth was also unmoved with the All-Exchange A/D neutral, the NYSE positive and the NASDAQ negative.
- No stochastic signals were registered.
The data finds the McClellan 1-Day OB/OS Oscillators still neutral and nonthreatening (All Exchange: +10.19 NYSE: +26.89 NASDAQ: 3.12).
- The % of SPX issues trading above their 50 DMAs was unchanged at 65% and remains neutral as the Open Insider Buy/Sell Ratio lifted slightly to 35.6, staying neutral as well.
- The detrended Rydex Ratio (contrarian indicator) however, measuring the action of the leveraged ETF traders, fell to 0.77. While staying neutral, the fact that these historically wrong traders continue to disbelieve the recent market strength we find to be encouraging. We get nervous when they become notably leveraged long.
- This week’s contrarian AAII Bear/Bull Ratio rose to 0.95 turning neutral from bullish. The Investors Intelligence Bear/Bull Ratio (23.5/50.6) (contrary indicator) remains neutral although the number of bullish advisors declined.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg slipped to $221.41 for the SPX. As such, the SPX forward multiple is 21.3 with the rule of "20" finding ballpark fair value at 18.3.
- The SPX forward earnings yield is 4.68%.
- The 10-year Treasury yield slipped to 1.73%. We view support for the 10-Year at 1.60% with resistance at 1.85%.
In conclusion, the recent chart improvements from this week’s rally, combined with generally neutral data while the ETF traders remain shell shocked suggest we maintain our near-term “positive” outlook for equities.
SPX: 4,670/4,768 DJI: 35,922/36,300 COMPQX: 14,877/15,177 NDX: 15,683/16,127
DJT: 15,836/16,363 MID: 2,777/2,866 RTY: 2,175/2,210 VALUA: 9,744/9,822