Thursday, October 6, 2022

NASDAQ 100 Chart Turns Neutral


Insiders Continue Buying Activity

All the major equity indexes closed lower Friday with negative internals on the while the saw negative breadth but positive up/down volume. Trading volumes declined from the prior session for both exchanges. The charts saw two technical events registered with the trend turning neutral while another closed below its 50 DMA.

Other than those two events, no other technical events of import were registered, leaving the indexes in a mix of bullish, neutral and bearish near-term trends.

The data remains generally neutral, including the McClellan 1-day OB/OS Oscillators while two of the psychology data points counterbalanced their respective moves. So, in our opinion, the down session did not present enough evidence to warrant a change in our current “neutral/positive” macro-outlook for equities.

On the charts, all the major equity indexes posted losses Friday closing at various points within their intraday trading ranges.

  • The only technical events of import were the NDX closing below its near-term uptrend line, shifting its trend to neutral from positive.
  • As well, the VALUA closed below its 50 DMA but remains in an uptrend.
  • No violations of support were generated, leaving the COMPQX, and VALUA in uptrends with the , , NDX and neutral and the negative.
  • Cumulative market breadth was unchanged with the NYSE A/D positive and the All Exchange and NASDAQ neutral.
  • No stochastic signals were generated.

The data still finds all the McClellan 1-Day OB/OS oscillators in neutral territory (All Exchange: -6.65 NYSE: +1.38 NASDAQ: -13.38).

  • While the Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders moved deeper into cautionary territory at 1.45, the Open Insider Buy/Sell Ratio rose to 50.8 as insiders continued their buying activity that has seen a notable change of heart on their part of late as they had been largely absent over the prior several weeks. We continue to see their recent action as a positive.
  • Last week’s contrarian AAII bear/bull ratio (27.3/35.67) and Investors Intelligence Bear/Bull Ratio at 16.7/53.1(contrary indicator) improved, both seeing a drop in bulls and rise in in bears as the crowd became more fearful. Their new data will be released tomorrow.
  • Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $204.09 for the SPX. As such, the SPX forward multiple is 21.5 with the “rule of 20” finding fair value at approximately 18.8.
  • The SPX forward earnings yield is 4.64%.
  • The Treasury yield closed at 1.24. We view support to be 1.13% and resistance at 1.3%.

In conclusion, we are maintaining our current “neutral/positive” macro-outlook for equities until such evidence is presented to suggest otherwise.

SPX: 4,350/NA DJI: 34,580/NA COMPQX: 14,544/NA NDX: 14,800/15,048

DJT: 14,100/14,905 MID: 2,667/2,729 RTY: 2,120/2,225 VALUA: 9,415/9,704

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