Thursday, October 6, 2022

Near-Term Outlook Remains “Neutral/Positive” |


Data Mostly Neutral

The major equity indexes closed mostly lower yesterday with negative internals on the that saw lighter trading volume while the had positive internals on higher volume.

The charts saw one shift in trend and two bearish stochastic crossover signals generated while the data is still sending a generally neutral message. With that said, there was not enough evidence presented to warrant a change in our current “neutral/positive” macro-outlook for equities, in our opinion.

On the charts, the major equity indexes closed mostly lower yesterday with negative NYSE internals while the NASDAQ’s were positive.

  • Only the COMPQX and managed to post gains.
  • Regarding trends, the VALUA closed below its near-term uptrend line and is now neutral as are the , , NDX and . The COMPQX and remain in uptrends with the staying negative.
  • Cumulative market breadth was unchanged with the All Exchange and NASDAQ A/Ds neutral with the NYSE’s positive.
  • The COMPQX and NDX did generate bearish stochastic crossover signals. However, we believe they are not yet actionable as support levels were not violated.

The data still finds all the McClellan 1-Day OB/OS oscillators in neutral territory (All Exchange: -5.57 NYSE: -5.17 NASDAQ: -6.75).

  • The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipped to 1.33 and remains bearish.
  • Meanwhile, the Open Insider Buy/Sell Ratio also declined to 40.0 but remains in its neutral range as insiders 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 $204.38 for the SPX. As such, the SPX forward multiple is 21.5 with the “rule of 20” finding fair value at approximately18.8.
  • The SPX forward earnings yield is 4.66%.
  • The closed at 1.17. We view support to be 1.13% and resistance at 1.3%.

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

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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