The charts of the major equity indices saw some damage Friday with two finding their trends turning negative from neutral.
On the other hand, market psychology data saw some minor improvement in rebuilding the "wall of worry," while the S&P 500 continues to appear overvalued.
On the Charts
All the equity indices closed lower Friday on heavy trading volume and negative internals on the NYSE and Nasdaq. All closed at or near their intraday lows as buying pressure remained absent into the close.
The charts saw some damage in the following fashion.
The S&P 500, DJIA, Nasdaq Composite and Nasdaq 100 all closed below support with the S&P 500 ( see above) and DJIA short-term trends turning negative from neutral while the Nasdaq Composite turned neutral from positive.
The Nasdaq 100 is now the only index remaining in a near-term uptrend.
While the Dow Jones Transports, S&P MidCap 400, Russell 2000 and Value Line Arithmetic Index posted declines, they did not violate support and remain in neutral short-term trends.
Cumulative breadth weakened a bit as well but, in our opinion, remains neutral and above their 50-day moving averages on the All Exchange, NYSE and Nasdaq.
The stochastic levels are now oversold on the Dow Transports, MidCap 400 and Value Line index.
The data saw some improvement with the one-day McClellan Overbought/Oversold Oscillators moving deeper into oversold territory with the NYSE very oversold, suggesting a pause/bounce for that index (All Exchange: -84.91 NYSE: -105.53 NASDAQ: -68.05).
The Open Insider Buy/Sell Ratio remains neutral at 37.8.
The detrended Rydex Ratio (contrary indicator) saw the leveraged ETF traders becoming more fearful as it dropped to a neutral 0.4.
Last week's AAII Bear/Bull Ration (contrary indicator) remained neutral at 41.57/31.07 with more bears than bulls, showing the "crowd" has yet to become enthusiastic.
The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages is neutral at 61.8%.
Valuation continues to appear quite extended with the S&P 500 trading at a P/E of 23.5x consensus forward 12-month earnings estimates from Bloomberg of $128.14 per share while the "rule of 20" finds fair value at a multiple of 19.4x.
The S&P's forward earnings yield is 4.26% with the 10-year Treasury yield at 0.64%.
We remain "neutral/positive" in our near-term outlook.