All of the major equity indices closed higher Thursday with positive breadth and up/down volume.
The Russell 2000 and Value Line Arithmetic Index closed above their short-term resistance levels turning their short-term trends positive.
However, the S&P 500 (see below), DJIA, Nasdaq Composite and Dow Jones Transports continue to find their resistance levels notable barriers to progress. All closed at resistance that is coincident with high "volume at price" (VAP) levels.
These high overhanging VAP levels tend to be equated with significant supply that can require multiple attempts of violation before successfully overcoming that barrier.
The S&P, Russell and Value Line indices are in short-term uptrends with the rest neutral.
The All Exchange, NYSE and Nasdaq cumulative advance/decline lines remain positive with the NYSE's above its 50-day moving averages.
Data Is Mostly Neutral
The one-day McClellan Overbought/Oversold Oscillators remain mostly neutral with the NYSE's now slightly overbought (All Exchange:0.0 NYSE:+54.27 NASDAQ:+44.02).
The Open Insider Buy/Sell Ratio (52.5) and the percentage of S&P 500 stocks above their 50 DMAs (57.6) are neutral as well.
Psychology remains generally positive, with this week's AAII Bear/Bull Ratio (contrary indicator) seeing an increase in bearish sentiment in the face of the rally to 39.33/23.33. We view this lack of enthusiasm on the part of the crowd as a positive.
However, the detrended Rydex Ratio (contrary indicator) at -0.49 has shifted to neutral from positive.
The S&P 500 is trading at a forward P/E multiple of 16.9x the consensus 12-month earnings estimate from Bloomberg of $170.96 per share, while the "rule of twenty" fair value multiple stands at 17.9x.
The shift in valuation has largely been due to the notable drop in the 10-year Treasury yield to 2.09%.
The earnings yield stands at 5.91%.
We have yet to see a sufficient shift in the weight of the evidence to alter our near-term "neutral/positive" outlook for the major equity indices.