Most Index Charts Short-Term Neutral
Data Mixed
The major equity indexes closed mostly lower Friday with mixed internals on the NYSE and negative internals on the NASDAQ as trading volumes slipped from the previous session on both. Most closed near their lows of the day as two indexes closed below their near-term uptrend lines and are now neutral as are most of the index charts.
Meanwhile, the data is sending a somewhat mixed message as one of the McClellan OB/OS Oscillators remains overbought as insiders backed off from their buying activity. So, despite the futures indicating a strong open this morning, we are not yet convinced the recent market consolidations from the rally are completed.
Where the indexes close today in relationship to the open may shed more light on the subject. We remain, near-term “neutral/positive” macro-outlook for equities.
On the charts, the indexes closed mostly lower Friday and near their intraday lows.
- The NYSE had positive breadth but negative up/down volume while the NASDAQ was negative on both accounts.
- The only gainers were the MID and DJT.
- While no violations of support occurred, the COMPQX and VALUA closed below their near-term uptrend lines, turning their trends to neutral from positive. As such, all are neutral except the NDX and MID that are positive.
- Cumulative market breadth was unchanged with the All Exchange and NASDAQ neutral and the NYSE still positive.
- Stochastic levels remain overbought but bearish crossover signals have yet to appear.
The data finds the McClellan 1-Day OB/OS Oscillators remaining neutral on the All Exchange and NASDAQ while the NYSE’s remains overbought (All Exchange: +44.85 NYSE: +72.74 NASDAQ: +25.35).
- The % of SPX issues trading above their 50 DMAs dipped to 67% and remains neutral but near the upper end of its range for last year.
- The Open Insider Buy/Sell Ratio dropped to 31.3 and remains neutral. The past few sessions have seen a lessening of insider buying interest.
- Meanwhile, the detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders also dipped to 1.24 but remains bearish.
- Last week’s contrarian AAII Bear/Bull Ratio dropped to 1.23 but remained bullish as the crowd remained nervous and unwilling to embrace recent market strength.
- But the Investors Intelligence Bear/Bull Ratio (24.4/55.0) (contrary indicator) did a total flip flop from the prior week as bulls now outweigh bears yet remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dipping to $216.01 for the SPX. As such, the SPX forward multiple is 22.1 and near peak 2021 levels with the “rule of 20” still finding fair value at approximately 18.5.
- The SPX forward earnings yield is 4.53%.
- The 10-year Treasury yield dipped to 1.51%. We ae raising our support level for the 10-Year to 1.42%. Resistance is unchanged at 1.58%.
In conclusion, we remain “neutral/positive” in our near-term macro-outlook for equities. While the futures suggest a strong open as this is written, the charts and data suggest we keep outlook intact. The key will be whether the indexes can hold onto their gains, as suggested by the futures, at the close.
SPX: 4,694/4,800 DJI: 35,960/36,500 COMPQX: 15,510/15,896 NDX: 16,300/16,607
DJT: 15,983/16,524 MID: 2,777/2,866 RTY: 2,200/2,250 VALUA: 9,678/9,972