Three New Closing Highs Registered

Data Largely Neutral

The major equity indexes closed higher Friday with positive internals on the NYSE and NASDAQ with all of the indexes closing at or near their intraday highs. The charts saw three indexes post new closing highs while some other bullish chart events were also registered. The near-term chart trends of the eight indexes we follow, however, remain a mix of bullish, neutral and bearish implications. The data is almost entirely neutral, including the 1-day McClellan OB/OS Oscillators. So, while some of the more cyclical indexes progress, others are falling behind, leaving the general equity markets somewhat bifurcated. A such, we are maintaining our near-term macro-outlook for equities at “neutral”.

• On the charts, all the major equity indexes closed higher Friday with positive internals.
• Technical events of import saw the SPX (page 2), DJI (page 32) and DJT (page 4) post new all-time closing highs.
• Meanwhile, the MID (page 4) closed above resistance and back above its near-term uptrend line, turning its trend to positive from neutral.
• So, the trend overview finds the SPX, DJI, DJT, MID and VALUA (page 5) bullish with the NDX (page 4) neutral and the COMPQX (page 3) and RTY (page 5) bearish.
• Cumulative breadth is neutral on the All Exchange and NYSE while the NASDAQ’s remains negative. The breadth trends also contribute to the view of a bifurcated market, in our view.
• The MID and VALUA registered bullish stochastic crossover signals.

Regarding the data, the oversold McClellan 1-day OB/OS Oscillators moved back to neutral from their prior oversold levels (All Exchange: -24.15 NYSE: -3.61 NASDAQ: -39.25).

• The Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders remains neutral at 0.59.
• The Open Insider Buy/Sell Ratio saw an uptick in insider buying activity to 36.0 but remains in neutral territory as well.
• Last week’s Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) changed slightly to a mildly bearish 19.6/55.9 from its prior bearish level.
• Valuation still appears extended with the forward 12-month consensus earnings estimate from Bloomberg rising to $174.64, leaving the SPX forward multiple at 22.8 while the “rule of 20” finds fair value at 18.3. We reiterate the valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
• The SPX forward earnings yield stands at 4.39%.
• The 10-year Treasury yield rose to 1.66 and, in our opinion, remains in an uptrend. We continue to monitor it closely as it has been having rather significant influence on the equity markets of late.

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In conclusion, Friday’s action saw some positive events on the charts while the data is generally neutral. However, the notably split performance within the indexes suggests we maintain our near-term Macro-outlook at “neutral”.

SPX: 3,910/NA

DJI: 32,533/NA

COMPQX: 12,759/13,186

NDX: 12,690/13,140

DJT: 14,200/NA

MID: 2,570/2,634

RTY: 2,140/2,290

VALUA: 8,735/9,0953

Written By: Guy S. Ortmann, CMT