Negative Cumulative Breadth Persists |


McClellan 1-Day OB/OS Oscillators Remain Oversold

The major equity indexes closed mixed Monday with negative internals on the while the saw negative breadth but positive up/down volume. Most closed near their lows of the session.

One index chart closed below its near-term uptrend line and is now neutral, leaving the indexes still in a mix of bullish, neutral and bearish near-term trends. Unfortunately, market breadth deteriorated further and remains a headwind, in our opinion, for market progress.

Meanwhile, the data is still sending a hopeful message from the McClellan 1-Day OB/OS Oscillators that moved deeper into oversold territory. As yesterday, they still suggest some pause or bounce from the recent weakness. The rest of the data was little changed. So, the split between poor market breadth and oversold conditions suggest we maintain our current “neutral” near-term macro-outlook for equities.

On the charts, the major equity indexes closed mixed yesterday with negative breadth on both the NYSE and NASDAQ as trading volumes rose from the prior session.

  • At the close, most were near their lows of the day.
  • The only technical event of note was the COMPQX closing below its near-term uptrend line and is now neutral versus its previous bullish trend. As well, it generated a bearish stochastic crossover signal.
  • Now we find the SPX, NDX, and VALUA in uptrends with the DJI and RTY negative as the rest remain neutral.
  • Our concern regarding poor market breadth persists as yesterday’s gains on some of the indexes were overshadowed by a worsening of cumulative breadth for the All Exchange NYSE and NASDAQ as the All Exchange and NASDAQ remain negative and below their 50 DMAs. The NYSE is negative as well but above its 50 DMA. In our opinion, it’s an unhealthy structure for the markets as the foundation upon which they are built looks shaky.

The data finds the McClellan 1-Day OB/OS Oscillators moving deeper into oversold territory and still implying some potential for an oversold bounce or pause in weakness for the near-term (All Exchange: -80.17 NYSE: -77.72 NASDAQ: -80.84).

  • Also offering a little hope was the detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders dipping a bit further to 1.11 but remains inside bearish territory. However, they are lightening up on their leveraged long exposure.
  • The Open Insider Buy/Sell Ratio was unchanged at 39.1 and remains neutral. Thus, the Rydex/OIBS dynamic moved in a more encouraging direction.
  • This week’s contrarian AAII Bear/Bull Ratio (0.63) remained neutral as did the Investors Intelligence Bear/Bull Ratio (21.4/57.2) (contrary indicator).
  • Valuation finds the forward 12-month consensus earnings estimate from Bloomberg lifting to $214.92 for the SPX. As such, the SPX forward multiple is 21.8 with the “rule of 20” finding fair value at approximately 18.4.
  • The SPX forward earnings yield is 4.59%.
  • The Treasury yield closed at 1.63% and above resistance. We view new resistance at 1.64% and support at 1.54%.

In conclusion, we remain “neutral” in our near-term macro-outlook for equities.

: 4,620/4,717A : 35,460/35,953 COMPQX: 15,598/16,117 : 16,130/NA

: 16,000/16,915 : 2,872/2,907 : 2,320/2,375 VALUA: 9,937/10,151

All charts courtesy of Worden

SPX Daily Chart
DJI Daily Chart
NDX Daily Chart
MID Daily Chart
DJT Daily Chart
RTY Daily Chart

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