Escalating trade war news Friday morning is putting pressure on the large-cap ETFs that, should they break high VAP support levels, could foster further weakness. Meanwhile, resistance levels were tested again but failed to be violated to the upside.
On the Charts
The major equity indices closed mixed Thursday with the DJIA, S&P MidCap 400 and Value Line Arithmetic Index posting minor gains as the rest declined.
Trading volume was light with negative breadth on the Nasdaq but positive up/down volume. The NYSE's internals were positive.
The S&P 500 (see below), DJIA, Nasdaq Composite, Nasdaq 1000 and Dow Jones Transports tested their resistance levels that were once again left intact.
All of the near-term trends are neutral, in our view, with high "volume at price" (VAP) levels supportive on the DJIA and Nasdaq 100. They are resistant on the Nasdaq Composite, Dow Transports, MidCap 400 and Value Line index.
All are below their 50-day moving averages.
We would also note the Russell 2000 and Value Line have made lower highs and lower lows since May, adding some question as to general market health.
News Friday morning of increasing trade war tensions is putting pressure on the large cap ETF charts that, from an hourly view, could turn darker should their support levels be violated to the downside.
The data remains neutral, including all of the one-day McClellan Overbought/Oversold Oscillators (All Exchange:+15.76 NYSE:+19.16 Nasdaq:+13.94).
The detrended Rydex Ratio (contrary indicator) remains neutral at -0.15 as is the percentage of S&P 500 stocks trading above their 50-day moving averages at 43.4.
Tuesday's AAII Bear/Bull Ratio (contrary indicators) turned bullish as the crowd now finds bears outnumbering bulls 38.6/27.33.
The Open Insider Buy/Sell Ratio remains neutral at 70.9.
Valuation continues to appear appealing with the 12-month forward consensus earnings estimate from Bloomberg for the S&P 500 at $172.07 per share, leaving the forward P/E multiple at 17.0x while the "rule of twenty" finds fair value at 18.4x.
The 10-year Treasury yield is 1.61%.
The earnings yield stands at 5.89%.
The charts and data suggest we maintain our near-term "neutral" outlook for the major equity indices in spite of valuation appearing appealing. Given Friday morning's news, should support levels break, the outlook would likely darken.