McClellan 1-Day OB/OS Oscillators Remain Neutral
The major equity indexes closed mixed Friday with positive e internals on the NYSE and NASDAQ as trading volumes rose on both exchanges from the prior session. The COMPQX, NDX and DJT closed lower on the day with the rest posting gains as the SPX made a new closing high.
So, all but one are in near-term uptrends with positive market breadth as a suppotr6ting structure. The data is mostly neutral, including the 1-day McClellan OIB/OS Oscillators that have yet to flash cautionary signals. As such, no evidence was presented at Friday’s close to suggest a change in our current “neutral/positive” macro-outlook for equities.
On the charts, the major equity indexes closed mixed Friday with positive internals on the NYSE and NASDAQ on higher trading volumes.
- While the COMPQX, NDX and DJT posted losses, the rest gained ground with the SPX managing to achieve a new closing high.
- As well, bullish developments were seen on the DJI and MID as both closed above near-term resistance and their 50 DMAs, turning their trends to bullish from neutral.
- So, all the indexes, except the DJT being neutral, are in near-term uptrends and above their 50 DMAs.
- Market breadth is supportive with the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ staying positive and above their 50 DMAs.
- No stochastic signals were generated at the close of the session.
Regarding the data, McClellan 1-Day OB/OS Oscillators are still neutral and not yet threatening, in our opinion (All Exchange: +15.06 NYSE: -2.2 NASDAQ: +29.36).
- The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.2 but remains in bearish territory. Last week’s contrarian AAII bear/bull ratio (22.23/41.8) was little changed and remains mildly bearish as was the Investors Intelligence Bear/Bull Ratio (contrary indicator) at a bearish 16.3/54.
- The Open Insider Buy/Sell Ratio is little changes at a neutral 28.2. Valuation finds the forward 12-month consensus earnings estimate from Bloomberg flat at $192.43 for the SPX.
- As a result, the SPX forward multiple now stands at 22.2 with the “rule of 20” suggesting fair value is around 18.5.
- The SPX forward earnings yield is 4.49%.
- The 10-year Treasury yield rose to 1.54 and near resistance. 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. However, a violation of resistance could prove near-term problematic for equities. We will monitor it closely.
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: 4,235/NA DJI: 33,795/34,551 COMPQX: 13,910/NA
NDX: 13,974/NA
RTY: 2,290/2,350 VALUA: 9,536/9,807