Data Remains Mostly Neutral
All but one of the major equity indexes posted gains yesterday, the exception being the . All closed at or near their intraday highs with positive internals on both the and . More new closing highs were achieved while cumulative market remained unchanged and neutral. The near-term chart trends continue to be mixed while the data is still sending a generally neutral message except for some of the psychology data suggesting a potential excess of bullish expectations. The net result was nothing appeared on the charts or data to warrant a change in our current “neutral/positive” macro-outlook for equities at this time.
- On the charts, the only index to post a loss yesterday was the DJT (page 4).
- The rest posted gains with the (page 2), (page 2), COMPQX (page 3) and (p[age 3) making new closing highs on positive market internals.
- The only other technical event of import was the MID (page 4) managing to climb back above its 50 DMA.
- So, the near-term trends are unchanged with the SPX, DJI, COMPQX and NDX in near-term uptrends, the MID, RTY and VALUA neutral and the DJT negative.
- Cumulative breadth remains neutral and above the 50 DMA for the All Exchange, NYSE and NASDAQ.
- No stochastic signals were generated.
The data finds all the McClellan 1-Day OB/OS still in neutral territory (All Exchange: -18.28 NYSE: -11.11 NASDAQ: -22.88).
- The Rydex Ratio (contrarian indicator page 8) measuring the action of the leveraged ETF traders was unchanged and remains bearish at 1.29.
- This week’s contrarian AAII bear/bull ratio (23.33/43.07) moved back into mildly bearish territory while the Investors Intelligence Bear/Bull Ratio (contrary indicator page 9) saw a decline in bears and a lift in bulls, remaining bearish at 15.5/60.8. It suggests an excess of bullish expectations, in our opinion.
- The Open Insider Buy/Sell Ratio saw an uptick to 28.6 and remains neutral.
- Valuation finds the forward 12-month consensus earnings estimate from Bloomberg at $199.07 for the SPX. As a result, the SPX forward multiple is 22.0 with the “rule of 20” finding fair value at approximately18.6. The SPX forward earnings yield is 4.54%.
- The closed flat at 1.36. We view support as 1.2% and resistance at 1.44%. The 10-Year Yield remains in a downtrend from its March peak that we view as a positive for equities regarding the valuation gap.
In conclusion, the mix of trends on the charts combined with the OB/OS levels, market breadth, valuation and other data suggest we maintain our “neutral/positive” near-term macro-outlook for equities. However, investor psychology still suggests a potential overly optimistic view on their part.
DJI: 34,570/NA
COMPQX: 14,356/NA
NDX: 14,485/NA
DJT: 14,247/14,905
RTY: 2,180/2,225
VALUA: 9,461/9,672
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