Where do we go from here with short-term chart trends and the McClellan Oscillators sending out mixed signals?
Let's weigh all the evidence.
On the Charts
All of the major equity indices closed lower Tuesday with negative internals on heavier trading volumes. All closed at or near their intraday lows.
Only one technical event of note was generated as the Value Line Arithmetic Index (see below) closed below its near-term support while the Dow Jones Transports, S&P MidCap 400 and Russell 2000 closed on their respective support levels.
The continued split action between these indices and those of the narrower larger-cap indices remains a concern. Also, the unweighted and all-inclusive Value Line index suggests a lopsided level of bullish market participants. As such it brings market breadth into question.
This is also supported by the fact that the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq are now all negative.
All of the charts remain in short-term downtrends and below their 50-day moving averages as the Nasdaq 100 slipped below that metric at the close of the session.
High "volume at price" (VAP) levels remain supportive on the SPX, DJI, COMPQX and NDX and resistant on the rest, yet another example of bifurcation.
All stochastic levels are neutral.
The data remains largely neutral with the exception of all of the one-day McClellan Overbought/Oversold Oscillators moving into oversold territory as a result of Tuesday's declines and suggesting a possible bounce (All Exchange:-73.48 NYSE:-78.9 Nasdaq:-73.47).
The detrended Rydex Ratio (contrary indicator) is a neutral -0.38 as is the percentage of S&P 500 stocks trading above their 50-day moving averages at 31.3%.
The AAII Bear/Bull Ratio (contrary indicators) remains neutral at 33.0/28.33. However, the Investor's Intelligence Bear/Bull Ratio (contrary indicator) remains bearish at 17.1/55.3 suggesting an excess of bullish sentiment on the part of investment advisors.
The Open Insider Buy/Sell Ratio is neutral at 53.2.
Valuation seems appealing, with 12-month earnings estimates for the S&P 500 at $174.87 per share via Bloomberg, leaving the forward P/E multiple at 16.5x while the "rule of twenty" finds fair value at 18.5x.
The 10-year Treasury yield stands at 1.54%.
The earnings yield is 6.04%.
Bifurcation, weak market breadth and the near-term chart trends suggest we maintain our near-term "neutral/negative" outlook despite of the OB/OS suggesting a bounce.