The charts of the major equity indices have suffered further damage with all now in short-term downtrends as breadth continues to deteriorate.
However, as the charts are negative the data has turned slightly encouraging and the forward 12-month earnings estimates for the S&P 500 just saw a notable lift.
On the Charts
All of the indices closed lower Tuesday with negative internals on heavier trading volume.
The charts suffered further damage as the S&P 500 (see below), DJIA, Dow Jones Transports, S&P MidCap 400, Russell 2000 and Value Line Arithmetic Index all closed below their near-term support levels.
Also, the S&P closed below its 50-day moving average while the Nasdaq Composite closed below its long-term uptrend line. So, all of the charts are in short-term downtrends.
The stochastic levels, however, are now oversold on all but the S&P and Nasdaq 100, but have not given "bullish crossover signals" at this point.
High "volume at price" (VAP) levels are supportive on all but the Dow Transports where it is resistant.
Data Now Mixed
All of the one-day McClellan Overbought/Oversold Oscillators are now in oversold territory (All Exchange:-69.42 NYSE:-58.59 Nasdaq:-82.3). We would note they are capable of readings sometimes well below -100.
The detrended Rydex Ratio (contrary indicator) is a neutral +0.37 as is the percentage of S&P 500 stocks trading above their 50-day moving averages dipping to 48.1%.
Yesterday's AAII Bear/Bull Ratio (contrary indicators) remained neutral at 30.33/32.30 with the Investor's Intelligence Bear/Bull Ratio (contrary indicator) bearish at 16.8/55.1.
The Open Insider Buy/Sell Ratio remains neutral at 61.2.
Valuation seems appealing given the sizable lift in forward 12-month earnings estimates for the S&P 500 to $175.24 from $170.55 per share this morning, via Bloomberg. This leaves the forward P/E multiple at 16.8x while the "rule of twenty" finds fair value at 18.4x.
The 10-year Treasury yield stands at 1.64%.
The earnings yield is 5.96%.
While valuation appears to have improved and some oversold conditions have been generated, the charts and poor market breadth suggest we maintain our near-term "neutral/negative" outlook for the major equity indices.