The broadening of market breadth combined with the strengthening of the the charts of some of the less "popular" averages suggests a continued improvement of the underlying market structure.
Meanwhile, data have turned a bit more mixe while insider buying activity dissipated further.
On the Charts
The major equity indices closed mixed Monday but with positive internals on higher trading volume.
The Nasdaq 100 and Russell 2000 (see above) closed above their resistance levels and are now positive while the Value Line Arithmetic Index made another new closing high.
The nasdaq Composite rose as well while the rest posted losses.
In our opinion, the strength of the unweighted and broad Value Line index now followed by the Russell 2000 suggest a near-term "stealth bull market" has been occurring over the past several sessions.
We now find the Nasdaq Composite, Nasdaq 100, Russell 2000 and Value Line index in uptrends with the others neutral.
Market breadth remains positive on the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq.
Only the MidCap 400 is on a bearish stochastic crossover with the rest remaining overbought but lacking bearish signals.
The McClellan 1-Day Overbought/Oversold Oscillators are now overbought on the All Exchange and Nasdaq with the NYSE's remains neutral (All Exchange: +54.94 NYSE: +40.68 Nasdaq: +65.67).
The Rydex Ratio (contrarian indicator), measuring the action of the leveraged ETF traders, was unchanged at 1.17 and remains in bearish territory.
This week's contrarian AAII bear/bull ratio (24.18/39.18) stayed neutral but saw a lift in bullish sentiment as did the Investors Intelligence Bear/Bull Ratio (contrary indicator) at 16.25/53.6, which remains on a bearish signal.
The Open Insider Buy/Sell Ratio dropped to 24.3 and is now bearish as insiders fail to show buying interest in their stocks.
Valuation continues to appear extended with the forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg rising to $191.46 per share. The S&P's forward P/E multiple is 22.1x with the "rule of 20" finding fair value at 18.4x. 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 is 4.52%.
The 10-year Treasury yield closed at 1.57% and near what we view as support at 1.55%. Resistance is 1.63%. We continue to believe the moves in the 10-year yield may well have the greatest influence over the near-term action on the equity indices.