The charts of the major equity indices saw a number of positive technical events Friday including several new closing highs with another shifting trend to neutral from negative. All closed at or near their intraday highs.
Let's take a closer look and determine what to do now.
On the Charts
All the major equity indices closed higher Friday and near their intraday highs with generally positive internals.
The charts saw several positive technical events registered with the S&P 500 (see below), DJIA, Nasdaq Composite and Nasdaq 100 all closing above their respective resistance levels to new closing highs.
Also, the Dow Jones Transports finally managed to close above its near-term downtrend line and is now neutral versus its prior negative trend.
As such, the near-term trends are positive on the S&P 500, DJIA, Nasdaq Composite and Nasdaq 100.
The Dow Transports, Midcap 400 and Value Line Arithmetic Index are neutral with only the Russell 2000 remaining in a downtrend.
Cumulative market breadth is unchanged and neutral on the All Exchange, NYSE and Nasdaq.
Several of the stochastic levels are now overbought but have not yet generated bearish crossover signals.
The data finds all the McClellan 1-Day Overbought/Oversold oscillators all neutral and have yet to flash yellow warning lights (All Exchange: -24.61 NYSE: -26.82 Nasdaq: -21.07).
The Rydex Ratio (contrarian indicator), measuring the action of the leveraged ETF traders, remains bearish at 1.16 as they remain leveraged long.
Last week's contrarian AAII bear/bull ratio (24.5/41.67) remained in mildly bearish territory while the Investors Intelligence Bear/Bull Ratio (contrary indicator) continued to suggest an excess of bullish expectations on the part of investment advisors at a bearish 15.3/61.2.
The Open Insider Buy/Sell Ratio is unchanged at a neutral 32.4.
The forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg lifted to $200.72 per share. As such, the S&P's forward P/E multiple is 22.0x with the "rule of 20" finding fair value at approximately 18.7x.
The S&P's forward earnings yield is 4.55%.
The 10-year Treasury yield closed at 1.29% and near 1.3% resistance. We view support to be 1.13%. We are monitoring the yield for a possible violation of said resistance.
Several of the charts improved on Friday while the OB/OS levels remain non-threatening. Nonetheless, we are staying "neutral" in our near-term macro-outlook for equities as, in our opinion, some consolidation of recent gains may prove more opportune.