The Overbought/Oversold Oscillators indicated a bounce, which we are getting Friday. However, while some bounce may transpire over the very near term several of the major equity indices have closed below their near-term support levels, turning those trends negative.
Meanwhile, there are some important "VAP" levels to watch.
On the Charts
All of the indices close lower Thursday with negative internals on heavier trading volume.
The Nasdaq Composite, Nasdaq 100 (see above), S&P MidCap 400, Dow Jones Transports, Russell 2000 (see below) and Value Line Arithmetic Index closed below their near-term support levels and are now in negative short-term downtrends.
The S&P 500 and DJIA held support but only the S&P is now neutral with all others in short-term downtrends.
The cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ are now all negative with the All Exchange and Nasdaq below their 50-day moving averages.
Going forward, the "Volume at Price" (VAP) levels denoted by the horizontal red and green bars may prove to be important levels to watch.
The Nasdaq 100, Transports, MidCap, Russell and Value Line are below their VAPs, suggesting substantial resistance. The S&P, DJIA and Nasdaq Composite are above their VAPs, suggesting meaningful support.
The data is neutral with the exception of the one-day McClellan Overbought/Oversold Oscillators oversold and implying a bounce (All Exchange:-74.93 NYSE:-72.96 NASDAQ:-79.29).
The detrended Rydex Ratio (-0.66), Open Insider Buy/Sell Ratio (52.8) and percentage of S&P 500 stocks above their 50 DMAs (40.4) are all neutral as well.
Sentiment has turned more neutral, with the new AAII Bear/Bull Ratio at 27.67/37.0. However, the Investors Intelligence Bear/Bull Ratio (contrary indicator) remains negative at 17.5/51.4.
Then S&P 500 is trading at a forward P/E multiple of 16.5x consensus 12-month earnings estimates from Bloomberg of $171.40 per share, while the "rule of twenty" fair value multiple is 17.7x. This eases our prior valuation concerns when the S&P was trading at fair value a few weeks ago.
The earnings yield stands at 6.07%.
The continuing deterioration on the charts and market breadth suggest we maintain our near-term "neutral/negative" outlook, in spite of the OB/OS implying a near-term bounce.