Charts In Near-Term Downtrends | Investing.com

All the major equity indexes closed lower Monday with very negative internals on the NYSE and NASDAQ once again. Volumes increased on both exchanges that left the charts in weaker condition. At this stage, the majority of the index charts are now in near-term downtrends, while market breadth continues to degenerate. However, the McClellan 1-day Overbought/oversold Oscillators are very oversold, as a result of yesterday’s declines, and suggest some degree of short-term bounce/pause potential.

Yet, none of the other data is offering similar encouragement as do the OB/OS levels. Investor psychology continues to display an overabundance of bullish expectations while insiders have yet to show any real appetite for buying their stock at these levels. So, while some bounce in the indexes may be expedited near term, there is not yet enough of a shift in the weight of the evidence to alter or near-term “neutral/negative” macro-outlook for equities at this time.

On the charts, all the major equity indexes closed lower yesterday with negative internal on the and .

• More damage was incurred as the , , COMPQX and VALUA  closed below support.
• As well, the DJI closed below its near-term uptrend line as did the NDX.
• As such, the DJI and NDX are now in neutral near-term trends, while all others are now in downtrends.
• Regarding breadth, yesterday’s negative internals left the all exchange, NYSE and NASDAQ cumulative A/Ds negative and below their 50 DMAs, with the NASDAQ also violating its 200 DMA.
• Stochastic levels are now oversold on the MID and VALUA, but bullish crossover signals have not yet appeared.

The data finds all the McClellan 1-Day OB/OS are now very oversold and suggesting a bounce/pause (All Exchange: -125.00 NYSE: -134.65 NASDAQ: -117.12).

• However, the psychology data was disturbingly unmoved. 
• The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders remains bearish and up ticked to 1.2 as they remain leveraged long. One would have expected some lessening of long leverage at this point.
• This week’s contrarian AAII bear/bull ratio (24.5/41.67) remains in mildly bearish territory while the Investors Intelligence bear/bull ratio (contrary indicator) continues to suggest an excess of bullish expectations on the part of investment advisors, despite the recent market drubbing, at a bearish 15.3/61.2. Important market bottoms usually find a much higher degree of fear on their part.
• The Open Insider Buy/Sell Ratio remains a neutral 29.8 and still shows a lack of appetite for insiders to buy their own stock.
• Valuation finds the forward 12-month consensus earnings estimate from Bloomberg at $199.27 for the SPX. As a result, the SPX forward multiple dropping to 21.4 with the “rule of 20” finding fair value at approximately18.8. The SPX forward earnings yield is 4.68%.
• The closed below support at 1.18%. We now adjust our support to 1.13% with resistance at 1.3%.

In conclusion, the charts and data still suggest caution is warranted for the near-term, by our work, although some bounce is now likely due to the OB/OS condition.

SPX: 4,214/4,300  

DJI: 33,595/34,460  

COMPQX: 14,163/14,432    

NDX: 14,485/14,876                         

DJT: 14,247/14,905  

MID: 2,572/2,665  

RTY: 2,120/2,225    

VALUA: 8,953/9,396