Near-Term Chart Trends Unchanged And Mixed

Data Remains Mostly Neutral

The major equity indexes closed mixed Wednesday but with positive internals on the NYSE this time while the NASDAQ saw negative breadth but positive up/down volume. Overall trading volumes rose on both exchanges from the prior session. The only technical event of note was the SPX posting another new closing high, leaving the near-term trends of the indexes unchanged and a mix of neutral and bullish projections. So, with the data staying largely in neutral territory, nothing occurred yesterday within our discipline to alter our current “neutral/positive” macro-outlook for equities although we reiterate our sense that the markets have become more selective.

On the charts, the major equity indexes closed mixed again Wednesday with positive NYSE and mixed NASDAQ internals as trading volumes rose on both exchanges.

• Most closed near the midpoints of their intraday ranges.
• The only technical event of note was the SPX (page 2) managing to post another new closing high. All the indexes advanced except the COMPQX (page 3) and NDX (page 3) closing lower on the day.
• As such, the near-term chart trends are unchanged with the SPX, DJI (page 2), COMPQX (page3) and NDX
• (page 3) in near-term uptrends with the rest staying neutral.
• Only the DJT and MID are trading below their 50 DMAs.
• The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are unchanged at neutral and above their 50 DMAs.
• No stochastic signals were generated.

The data finds the McClellan 1-Day OB/OS Oscillators still neutral and not yet threatening, in our opinion (All Exchange: -13.7 NYSE: -18.7 NASDAQ: -9.06).

• The Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders dipped slightly to 1.2 and remains in bearish territory.
• This week’s contrarian AAII bear/bull ratio (23.4/40.57) was little changed and remains mildly bearish while the Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) saw a drop in bears and rise in bulls at a bearish 15.8/56.5.
• The Open Insider Buy/Sell Ratio rose to 27.9 but remains neutral.
• Valuation finds the forward 12-month consensus earnings estimate from Bloomberg rising to $192.73 for the SPX. As a result, the SPX forward multiple stands at 22.3 with the “rule of 20” finding fair value at approximately18.6.
• The SPX forward earnings yield is 4.48%.
• The 10-year Treasury yield closed at 1.44. We still view support as 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.

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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, although the environment has become more selective, in our opinion.

SPX: 4,220/NA

DJI: 33,174/34,248

COMPQX: 13,910/NA

NDX: 13,974/NA

DJT: 14,602/15,181

MID: 2,614/2,713

RTY: 2,290/2,350

VALUA: 9,536/9,807

Written By: Guy S. Ortmann, CMT