The major equity indices closed split Tuesday with the S&P 500, DJIA, Nasdaq Composite and Nasdaq 100 posting fractional gains as the rest declined.
While the DJIA, Nasdaq Composite and Nasdaq 100 made fractional new closing highs, the Dow Jones Transports and S&P MidCap 400 closed below their near-term uptrend lines turning their trends to neutral from positive as is the case with the Russell 2000 and Vale Line Arithmetic Index.
We would also note the new closing highs were achieved on negative market breadth, suggesting a narrowing base of participants.
Meanwhile, the MidCap (see below) flashed a "bearish stochastic crossover signal" implying potential further weakness for that index. With the exception of the Transports, the rest are still overbought via that metric.
The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain neutral.
Worthy of note is the VIX, at 12.74, which remains near low levels seen three times over the past year that preceded market corrections.
As a whole, we believe some cautionary clouds may be forming.
The data remains generally neutral. All of the one-day McClellan Overbought/Oversold Oscillators are neutral (All Exchange:-10.18 NYSE:-27.61 Nasdaq:+5.0).
The detrended Rydex Ratio (contrary indicator) is neutral at +0.61 while this week's AAII Bear/Bull Ratio (contrary indicators) remains neutral at 26.33/36.33.
The Investor's Intelligence Bear/Bull Ratio (contrary indicator), however, continues to be bearish at 17.8/54.2, suggesting an excess of bullish sentiment/complacency on the part of investment advisors.
The percentage of S&P 500 stocks trading above their 50-day moving averages is a neutral 64.0%.
However, the Open Insider Buy/Sell Ratio at 25.9 (see below) is a hair's breadth from turning bearish. It suggests insiders have become relatively active sellers into the recent rally.
Valuation is now essentially at fair value with forward 12-month earnings estimates for the S&P 500 dipping to $172.18 per share via Bloomberg, leaving the forward P/E multiple at 18.0x while the "rule of twenty" finds fair value at 18.1x.
The 10-year Treasury yield is 1.91% while the earnings yield is 5.57%.
In conclusion, the issues noted above continue to suggest we keep our near term "neutral" outlook in place at this time.