Turbulence Comes In – RealMoney


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Mixed signals and shared performances. This is what the market is producing now.

Major stock indexes on Tuesday recorded a mix of positive and cautious signals, leaving short-term trends with a combination of neutral and bullish implications. We see money going into value stocks and out of some growth stocks.

Meanwhile, the data is mixed, producing no strong implications for near-term activity. The recent rise in the 10-year Treasury yield has put some downward pressure on the forecast fair valuation of the S&P 500.

On the cards

Source: Worden

The indices closed mixed on Tuesday with high trading volume, with the NYSE seeing positive internal action while the Nasdaq was negative.

The S&P 500 (see above), the Nasdaq Composite, and the Nasdaq 100 posted declines as the rest rose.

The close found the DJIA at a new closing high as the Dow Jones Transport and Value Line Arithmetic indices closed above resistance, shifting their short-term trends from neutral to positive.

On the flip side, the Nasdaq 100 closed below its short term uptrend line and is now neutral while also showing a bearish crossover signal.

Thus, the short-term trends are neutral for the S&P 500, the Nasdaq Composite and the Nasdaq 100, the rest being bullish.

The cumulative market size remained unchanged with positive A / D All Exchange and NYSE and Nasdaq neutral. Only the NYSE A / D is above its 50-day moving average in this regard.

Watch the data

The McClellan 1-Day Overbought / Oversold oscillators are mixed with the All Exchange and the somewhat overbought NYSE and the Nasdaq falling to neutral (All Exchange: +50.21 NYSE: +65.51 Nasdaq: +38.3).

The percentage of S&P 500 issues trading above their 50-day moving averages has reached 78% and remains neutral but near the upper end of its range last year. This is not a death knell, in our opinion, but suggests a potential increase in market selectivity.

The Open Insider Buy / Sell Ratio fell to 38.1 and remains neutral.

Meanwhile, the Trendless Rydex Ratio (countercurrent indicator), measuring the action of leveraged ETF traders, has fallen to 1.12 but remains bearish.

This week’s contrarian AAII Bear / Bull ratio fell to 1.12 but remained bullish as crowds remain skeptical of the recent rally.

The Investors Intelligence Bear / Bull Ratio (24.4 / 55.0) (contrary indicator) remained unchanged and remains neutral.

Evaluation and returns

The 12-month consensus earnings estimate for Bloomberg’s S&P 500 edged down to $ 222.05 per share. As such, the forward P / E multiple of the S&P is 21.6x with the 20 “rule finding the approximate fair value dipping to 18.3x.

The return on S&P futures earnings is 4.63%.

The 10-year Treasury yield was 1.67%. We consider 10yr support at 1.50% with resistance at 1.7%.

Short term outlook

We remain “neutral / positive” in our short-term macroeconomic outlook for equities as turmoil emerged with silver shifting into value stocks on Tuesday as some growth issues were addressed.

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