How are the charts of the major equity indices holding up within the daily roller coaster ride in the markets?
Late-day selling Tuesday left the indices at or near their intraday lows, but no support levels or trend lines were violated, leaving the charts technically unchanged.
The data dashboard remains generally neutral while valuation continues to be our primary outlying concern.
On the Charts
All the major equity indices closed lower Tuesday with negative internals on the NYSE and Nasdaq as volumes declined on both exchanges.
While all closed near their session lows, all support levels were left intact as were the current near-term trends that are positive on all but the Dow Jones Transports and Russell 2000 (see above), which are neutral.
All remain above their 50-day moving averages as well.
However, breadth needs improvement as the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain negative but above their 50 DMAs.
Index Support/Resistance Levels
S&P 500: 2,865/3,005
Nasdaq Composite: 8,934/9,311
Nasdaq 100: 8,999/9,437
Dow Jones Transports: 7,950/8,377
S&P MidCap 400: 1,567/1,679
Russell 2000: 1,250/1,480
Value Line Arithmetic Index: 5,116/5,528
Deep Dive on the Data
The data continues to send a generally neutral message although sentiment continues to be positive.
The one-day McClellan Overbought/Oversold Oscillators remain neutral on the All Exchange, Nasdaq and NYSE (All Exchange: +10.35 NYSE: +6.3 Nasdaq: +12.92).
The Open Insider Buy/Sell Ratio, at 97.5, remains neutral but continues to suggest insiders have increased their buying during the past several sessions even as the markets advanced. This is somewhat unique as, historically, insiders have tended to be more on the sell side as prices advance. We don't want to place too much emphasis on this point but do find it encouraging.
The detrended Rydex Ratio (contrary indicator) at +0.29 is also neutral.
This week's AAII Bear/Bull Ratio (contrary indicator) at 49.1/25.87 continues to send a bullish message as the crowd has yet to embrace the market's strength from the March lows.
The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages has turned bearish at 81.4%.
Valuation continues to be our largest concern with the S&P 500 trading at a P/E of 22.7x consensus forward 12-month earnings estimates from Bloomberg that have dropped to $128.96 per share, versus the "rule of 20" fair value multiple of 19.3x, suggesting the index remains overvalued.
The S&P's forward earnings yield is 4.41% with the 10-year Treasury yield at 0.71%.
Wednesday's market weakness did not have enough impact on the charts as the data continues to be generally neutral in nature, thus causing us to maintain our near-term "neutral/positive" outlook for the equity markets.