The trends of the major indices remain a mix of bullish, bearish and neutral from a short-term perspective while the data are a mix of neutral and negative readings.
Let's break it all down after Tuesday's market action.
On the Charts
The indices closed mixed Tuesday with positive internals and lighter volumes on the NYSE and Nasdaq.
Source: Worden
The Dow Jones Transports posted another new closing high as the MidCap 400 and Value Line Arithmetic Index closed higher as well.
The rest of the indices posted losses, leaving the S&P 500 (see above), DJIA, Dow Transports and Value Line index in short-term uptrends, while the Nasdaq Composite and Russell 2000 are bearish and the Nasdaq 100 and MidCap 400 neutral.
Market breadth is rather lackluster with the cumulative advance/decline lines for the All Exchange and NYSE neutral with the Nasdaq's in a downtrend.
The S&P, Dow Transports and DJIA are now overbought on their stochastic readings but have not flashed bearish crossover signals yet.
Market Data
The data remain a mix of neutral and negative implications.
The McClellan one-day Overbought/Oversold Oscillators remain neutral (All Exchange: -33.27 NYSE: -12.72 Nasdaq: -47.88).
The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders remains neutral but lifted to 0.82 as the leveraged ETF traders increased their leveraged long exposure.
The Open Insider Buy/Sell Ratio saw an uptick in insider buying activity as well, to 36.8, but remains in neutral territory.
This week's Investors Intelligence Bear/Bull Ratio (contrary indicator) remains mildly bearish 18.8/57.4.
Market Valuation
Valuation still appears extended with the forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg of $174.64 per share, leaving the S&P's forward P/E multiple at 22.6x while the "rule of 20" finds fair value at 18.3x. We reiterate the valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
The S&P's forward earnings yield stands at 4.4%.
The 10-year Treasury yield rose to 1.73% and, in our opinion, remains in an uptrend with potential to test the 1.8% level. We continue to monitor it closely as it has been having rather significant influence on the equity markets of late.
Near-Term Outlook
The combination of mixed index chart patterns, lackluster market breadth, less-than-thrilling data and valuation suggest we maintain our "neutral" near-term macro-outlook for equities that remain very selective regarding individual market participation.
