Mixed Close Sees Insiders Step Up Buying Activity

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The major equity indexes closed mixed yesterday with mixed internals on the while the ’s were negative. Market breadth was negative on both exchanges as trading volumes fell from the prior session.

In contrast to recent activity, however, most closed near their highs of the day as opposed to near their lows over the past several sessions. There was some shift in the chart trends with one improving as two others weakened, leaving them still in a mix of bullish, neutral and bearish near-term trends.

The data still finds the McClellan 1-Day OB/OS Oscillators oversold as well as a pickup in insider buying activity, both of which offer some near-term encouragement, in our opinion. So, while market breadth remains negative with mixed charts, the data has become a bit more encouraging. As such, we remain near-term “neutral” in our 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 dipped from the prior session. However, instead of closing near their intraday lows, they closed near their highs, possibly suggesting a weakening of selling pressure.

  • The SPX, DJI, DJT, and VALUA closed higher as the rest posted losses.
  • Some shifts in near-term trends were generated as the DJT closed above its near-term downtrend line and is now neutral versus negative. On the other hand, the COMPQX closed below support while the NDX and VALUA closed below their near-term uptrend lines and are now neutral versus positive.
  • So, only the SPX is in an uptrend with the RTY negative and the rest neutral.
  • Unfortunately, cumulative market breadth weakened further with the cumulative advance/decline lines staying negative for the All Exchange NYSE and NASDAQ, all of which need strengthening to become more optimistic in our outlook.
  • The NDX generated a bearish stochastic crossove5r signal.

The data finds the McClellan 1-Day OB/OS Oscillators still in oversold territory and still implying some potential for an oversold bounce or pause in weakness for the near-term (All Exchange: -79.01 NYSE: -73.9 NASDAQ: -81.83).

  • The detrended Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders lifted to 1.28 and remains inside bearish territory.
  • The Open Insider Buy/Sell Ratio (page 9), on the other hand, rose to 46.4 from 39.1 as insiders increased their buying activity. It remains neutral but is improving.
  • 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 dipping to $214.85 for the SPX. As such, the SPX forward multiple is 21.8 with the “rule of 20” finding fair value at approximately 18.3.
  • The SPX forward earnings yield is 4.58%.
  • The closed higher at 1.67% and above resistance. We view new resistance at 1.7% and support at 1.6%.

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

: 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
DJT Daily Chart
MID Daily Chart
RTY Daily Chart



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