Index Charts See Mixed Events

Data Remains Mostly Neutral

Most of the major equity indexes closed lower Wednesday with two exceptions as internals were negative on the NYSE and NASDAQ as trading volumes rose on both from the previous session.

The charts saw mixed action with some positive and negative events being registered, leaving them in a combination of bullish, neutral and bearish near-term trends. The data remains generally neutral while corporate insiders backed off a bit further from their recent buying activity. However, at the end of the day, the charts and data continued to suggest we maintain our current “neutral/positive” macro-outlook for equities.

On the charts, the indexes closed mostly lower yesterday with negative internals and higher trading volumes on the NYSE and NASDAQ.

• The two exceptions were the COMPQX and NDX posting gains with the NDX closing above near-term resistance, shifting its trend to bullish from neutral.
• On the other hand, the DJT slipped back below its downtrend line, shifting its trend back to bearish from neutral.
• Thus, we find the SPX, COMPQX and NDX in near-term uptrends, the DJT negative and the rest neutral.
• There was some slippage in market breadth as the NYSE cumulative advance/decline line turned neutral and below its 50 DMA, joining the All Exchange and NASDAQ in that condition.
• The DJI, MID and VALUA gave bearish stochastic crossover signals but our not yet actionable, in our opinion, as support levels have held.

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The data still finds all the McClellan 1-Day OB/OS oscillators in neutral territory (All Exchange: -20.9 NYSE: -18.17 NASDAQ: -23.75).

• The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.24 but remains bearish.
• Meanwhile, the Open Insider Buy/Sell Ratio dipped a bit further, this time to 35.2 but remains in its neutral range as insiders again backed off their recent buying activity.
• This week’s contrarian AAII bear/bull ratio (27.17/34.32) and Investors Intelligence Bear/Bull Ratio at 16.5/52.6 (contrary indicator) saw little change leaving the AAII neutral and the II bearish.
• Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $205.52 for the SPX. As such, the SPX forward multiple is 21.4 with the “rule of 20” finding fair value at approximately18.8.
• The SPX forward earnings yield is 4.67%.
• The 10-year Treasury yield closed at 1.18. We view support to be 1.13% and resistance at 1.3%.

In conclusion, yesterday’s action left the charts and data at levels that suggest we maintain our current “neutral/positive” macro-outlook for equities intact.

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SPX: 4,374/4,423 DJI: 34,718/35,150 COMPQX: 14,585/14,780 NDX: 14,800/15,109

DJT: 14,100/14,701 MID: 2,667/2,729 RTY: 2,120/2,225 VALUA: 9,415/9,704

Written By: Guy S. Ortmann, CMT