Stock Markets Analysis & Opinion

Session Leaves Indexes’ Near-Term Trends Unchanged

Insiders Increase Selling Activity

The major equity indexes closed evenly split between losers and gainers yesterday, but internals were positive on the NYSE and NASDAQ as trading volumes rose from the prior session on both. However, the end result was all the near-term chart trends were left intact in a mix of positive, negative and neutral projections while cumulative market breadth was unchanged as well.

Likewise, the data dashboard is still sending a generally neutral message except for the Insider Buy/Sell Ratio that shows insiders increasing their selling activity of late. However, the trend of higher rates for the 10-year Treasury, as well as the high yield market, continues to be a potential headwind, in our opinion.

As such, the lack of an alteration on the charts and data suggest we keep our near-term “neutral/negative” macro-outlook for equities in place.

On the charts, the indexes closed evenly split yesterday with the SPX, DJI, COMPQX, and NDX posting losses as the rest saw gains.

  • Internals did improve on the day with positive breadth and up/down volumes and higher overall volumes on the NYSE and NASDAQ.
  • Yet, from a technical viewpoint, all the near-term trends were left intact with the DJT positive, the COMPQX and NDX negative and the rest neutral.
  • Cumulative market breadth was unchanged as well with the All Exchange and NYSE A/Ds neutral and the NASDAQ’s negative. All remain below their 50-DMAs.
  • No stochastic signals were generated.

The data finds the McClellan 1-Day OB/OS Oscillators remaining neutral (All Exchange: +8.98 NYSE: +19.89 NASDAQ: +0.27).

  • The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders lifted slightly and remains neutral 0.24 as their bullish expectations have waned from their excesses at the market’s highs.
  • Of note, the Open Insider Buy/Sell Ratio remains in bearish territory and dropped to 20.0% as insiders continue to increase their selling activity.
  • This week’s contrarian AAII Bear/Bull Ratio (38.9/27.83) remains mildly bullish as the “crowd” has become cautious. The Investors Intelligence Bear/Bull Ratio (22.5/40.4) (contrary indicator) saw a drop in bulls but remains neutral.
  • Valuation finds the forward 12-month consensus earnings estimate from Bloomberg dipping slightly to $213.31 for the SPX. As such, the SPX forward multiple is 20.4 with the “rule of 20” finding fair value at approximately 18.4.
  • The SPX forward earnings yield is 4.9%.
  • The 10-year Treasury yield dipped to 1.58%. after a recent run to 1.61%. We see resistance at 1.62% with support at 1.47%.

In conclusion, yesterday’s market left the charts and data intact that continue to suggest our near-term “neutral/negative” macro-outlook for equities be maintained until enough evidence appears to suggest otherwise.

SPX: 4,300/4,427 DJI: 33,914/34,951 COMPQX: 14,292/14,670 NDX: 14,509/14,920

DJT: 14,256/14,731 MID: 2,624/2,723 RTY: 2,200/2,280 VALUA: 9,361/9,590

S&P 500

SPX Daily Chart

Dow Jones Industrials

DJI Daily Chart

NASDAQ Composite

NASDAQ Composite Daily Chart

NASDAQ 100

NDX Daily Chart

Dow Jones Transports

DJT Daily Chart

S&P Midcap 400

MID Daily Chart

Russell 2000 Futures

RTY Daily Chart

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