The Nasdaq continues to outperform the rest of the equity indices, with both the Composite and Nasdaq 100 making another new closing highs amid mixed action in the other benchmarks.
Let's see where we go from here and if the momentum can continue.
On the Charts
The major equity indices closed mixed Wednesday with the S&P 500, Nasdaq Composite and Nasdaq 100 closing higher as the rest declined.
The Nasdaq Composite and 100 made more new closing highs while the S&P closed above resistance but, in our view, remains in a neutral/sideways trend as are the rest of the charts aside from the Nasdaq indices, which remain bullish.
The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain neutral and above their 50-day moving averages with the stochastic levels on the charts staying neutral as well.
The data saw little change and is generally neutral.
The one-day McClellan Overbought/Oversold Oscillators remain neutral (All Exchange: -25.68 NYSE: -30.66 Nasdaq: -20.77).
The Open Insider Buy/Sell Ratio crept a bit higher but remains neutral at 49.0.
The detrended Rydex Ratio (contrary indicator) was unchanged and neutral with the leveraged ETF traders staying somewhat indecisive at a neutral 0.39.
This week's AAII Bear/Bull Ratio (contrary indicator) saw an increase in bearish sentiment within the crowd but remains neutral at 44.91/27.6/31 as bears continue to outnumber bulls. In our opinion, the lack of enthusiasm on the part of the crowd remains an important positive factor.
The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages is neutral at 69.7%.
Valuation continues to appear quite extended with the S&P 500 trading at a P/E of 24.3x consensus forward 12-month earnings estimates from Bloomberg of $128.23 per share, while the "rule of 20" finds fair value at a multiple of 19.3x.
The S&P's forward earnings yield is 4.12% with the 10-year Treasury yield at 0.68%.
We have not become complacent in our outlook as might be suspected given that our near-term outlook has been "neutral/positive" for almost the entire run from the March lows. The fact is that the charts and data have not presented enough evidence to cause our discipline to alter our view. That being said, valuation does continue to be somewhat disconcerting.