Stocks continue their climb this Thanksgiving week. But don't let your guard down, as several indicators still tell us to remain cautious.
All of the major equity indices closed higher Friday with positive internals on lighter trading volumes. However, despite the gains, no notable technical events were generated on the charts.
This leaves S&P 500 and DJIA positive, the Dow Jones Transports and MidCap 400 negative and the Nasdaq Composite (see below), Nasdaq 100, Russell 2000 and Value Line Arithmetic Index neutral.
All managed to generate "bearish stochastic crossover" signals last week with some now oversold while Friday's action left the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq negative.
The VIX closed at 12.34 which, as noted last week, is at levels seen twice over the past 12 months that were followed by spikes in volatility and 2,000-point retracements on the DJIA.
The data remains generally neutral.
The one-day McClellan Overbought/Oversold Oscillators are neutral having relieved Friday morning's mildly oversold condition on the NYSE (All Exchange:-22.8 NYSE:-32.66 Nasdaq:-15.35).
The detrended Rydex Ratio (contrary indicator) is neutral at +0.76 with last week's AAII Bear/Bull Ratio (contrary indicators) neutral at 25.0/38.0.
However, the Investor's Intelligence Bear/Bull Ratio (contrary indicator) remained bearish at 118.1/57.1, suggesting a continuation of excess bullish sentiment/complacency on the part of investment advisors.
The percentage of S&P 500 stocks trading above their 50-day moving averages is a neutral 65.2% as is the Open Insider Buy/Sell Ratio at 45.1.
The S&P 500 is at fair value with forward 12-month earnings estimates for companies in the index dipping to $171.64 per share via Bloomberg, leaving the forward P/E multiple at 18.1x while the "rule of twenty" finds fair value at 18.2x.
The 10-year Treasury yield is 1.77% with the earnings yield 5.52%.
We are maintaining our near-term outlook for the major equity indices at "neutral/negative," reflecting the mix of the chart trends combined with weakening breadth, the cautionary VIX and a further decline in forward earnings estimates for the S&P 500.