All of the indices closed higher Thursday with positive internals as trading volumes slipped from Wednesday's trade. All closed at or near their intraday highs. Multiple chart improvements were registered as they all closed above their respective near-term resistance levels.
The S&P 500 (see below), Nasdaq Composite, Nasdaq 100 and S&P MidCap 400 Index managed to close back above their 50-day moving averages. As such, we now find all of the indices in neutral, sideways trends while the stochastic levels are neutral and have yet to enter overbought territory.
High "volume at price" (VAP) levels are seen as supportive on the S&P, DJIA and Nasdaq 100. They are resistant on the Nasdaq Composite, Dow Jones Transports and MidCap. Several prior high VAP levels we thought may be troublesome were overcome.
Cumulative breadth also improved as the NYSE's A/D is now positive and above its 50 DMA while the All Exchange and Nasdaq's are neutral.
The Data Is Neutral
The one-day McClellan Overbought/Oversold Oscillators we mistakenly assumed to be neutral Thursday morning are now, in fact, neutral (All Exchange:-19.18 NYSE:-19.12 Nasdaq:-18.81). While remaining neutral at 54.0, the Open Insider Buy/Sell Ratio has seen some lift in buying activity.
The detrended Rydex Ratio (contrary indicator) finds the leveraged ETF traders neutral as well at -0.37.
Valuation remains appealing based on current forward earnings estimates for the S&P 500. The 12 month forward consensus earnings estimate from Bloomberg for the S&P is now $172.21 per share, leaving the forward P/E multiple at a 17.1x while the "rule of twenty" finds fair value at 18.3x. This suggests valuation is still more appealing now than just a few weeks ago.
The 10-year Treasury yield is 1.72%.
The earnings yield stands at 5.86%.
Thursday's positive action was welcome. However, we are maintaining our near term "neutral" outlook for the major equity indexes at this time.