The outperformance of the economically sensitive stocks continues versus large-cap growth. The major equity indices remain a mix of neutral, negative and positive trends. Cumulative breadth remains split as well.
Regarding the data, most remain in neutral territory except for sentiment that is still sending a cautionary message due to what appears to be an excess of bullish expectations for the market.
However, we are keeping our eyes peeled for a potential shift in the current bifurcated index performance.
On the Charts
All the equity indices closed higher Thursday with positive NYSE and negative Nasdaq internals.
The S&P 500 closed above resistance and is now positive, while the DJIA (see above) and Dow Jones Transports made more new closing highs.
So, the mix of trends finds the S&P, DJIA, Dow Transports and Value Line Arithmetic Index positive with the MidCap 400 and Russell 2000 neutral. The Nasdaq Composite and Nasdaq 100 are still in near-term downtrends despite Thursday's gains.
Cumulative market breadth was unchanged with the All Exchange and Nasdaq negative and the NYSE positive, again showing the split in performance.
The Nasdaq Composite is now slightly oversold on its stochastic reading.
On the data, the McClellan 1-Day Overbought/Oversold oscillators remain neutral (All Exchange: -25.09 NYSE: -4.45 Nasdaq: -42.6).
Sentiment indicators were little changed and remain at cautionary levels. The Rydex Ratio (contrarian indicator) measuring the action of the leveraged ETF traders is still in bearish territory but dipped to 1.25. T
This week's Investors Intelligence Bear/Bull Ratio (contrary indicator) saw a drop in bullish sentiment at 16.5/59.2 as did the AAII bear/bull ratio at 23.6/49.7. However, both of those sentiment contrarian indicators remain in bearish territory.
The Open Insider Buy/Sell Ratio remains neutral at 26.2 as insiders have yet to exhibit any notable buying interest.
Valuation still appears extended with the forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg rising to $188.41 per share. This leaves the S&P's forward P/E multiple at 22.3x, down from 22.9x last week as the index stalled while forward estimates rose.
The "rule of 20" finds fair value at 18.4x. 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 4.48%.
The 10-year Treasury yield closed at 1.56%. We continue to view 1.55% as support with 1.63% as resistance.
The recent bifurcation of the markets and data still suggests we maintain our near-term "neutral/positive" macro-outlook for equities.