The major equity indices closed mostly higher Thursday, but did it affect the overall outlook for the broader markets?
Here where we stand after the bounce:
On the Charts
The only index to close lower Thursday was the Nasdaq 100 ( (QQQ) ETF). The rest posted gains with positive internals on the NYSE and Nasdaq.
While internal breadth was positive, it was insufficient to alter the current negative cumulative breadth trends for the All Exchange, NYSE and Nasdaq.
The only technical event of importance was the Dow Jones Transports (see above) closing above near-term resistance to a new closing high.
As such, the Dow Transports, S&P 500 and Value Line Arithmetic Index are in short-term uptrends with the Nasdaq Composite and Russell 2000 negative. The remainder are neutral.
The stochastic reading finally found some oversold conditions appearing on the MidCap 400 and Value Line index. However, bullish stochastic crossovers have yet to appear. The rest of the stochastic readings are neutral.
The oversold McClellan one-day Overbought/Oversold Oscillators finally managed to generate a bounce. The NYSE's, however, is now neutral with the All Exchange and Nasdaq staying oversold (All Exchange: -60.89 NYSE: -47.52 Nasdaq: -70.47).
The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders remains neutral at 0.57.
The Open Insider Buy/Sell Ratio is neutral as well at 30.7.
This week's Investors Intelligence Bear/Bull Ratio (contrary indicator) changed slightly to a mildly bearish 19.6/55.9 from its prior bearish level.
Valuation still appears extended with the forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg at $174.58 per share, leaving the S&P's forward P/E multiple at 22.4x, while the "rule of 20" finds fair value at 18.4x. 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 4.49%.
The 10-year Treasury yield was unchanged at 1.61%, but is rising in trading Friday. We continue to monitor it closely as it has been having rather significant influence on the equity markets of late.
Thursday's general strength leaves the weight of the evidence to keep our current near-term macro-outlook for equities at "neutral."