Tuesday's rebound in the stock market was a relief after Monday's slide.
Unfortunately, none of the action altered the state of the current short-term downtrends on all of the major equity indices.
On the Charts
All of the indices closed higher Tuesday with positive internals as trading volumes declined from the prior session. All closed somewhere between the midpoint and upper end of their intraday ranges.
While gains were posted across the board, none of the short-term downtrends or resistance levels were violated while all also remaining below their 50-day moving averages.
The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain negative with the Nasdaq's remaining below its 50 DMA.
No oversold stochastic readings have been generated.
We would also note high volume levels on the "volume at price" plot show high volumes at resistance on the Nasdaq Composite, S&P MidCap 400, Russell 2000 and Value Line Arithmetic Index.
The S&P 500 (see above), Dow Jones Industrials, Nasdaq 100 and Dow Transports have high volume at support levels. These "volume at price" levels theoretically add strength to either support or resistance, based on their location.
Data Is Largely Neutral
The one-day McClellan Overbought/Oversold Oscillators are mostly neutral with the NYSE's mildly oversold (All Exchange:-45.28 NYSE:-50.19 NASDAQ:-41.78).
However, sentiment remains mostly cautionary with the AAII Bear/Bull Ratio showing the crowd slightly bullish at 21.33/38.33 while the Investors Intelligence Bear/Bull Ratio (contrary vindicator) is negative at 17.8/55.5. By those two metrics, not enough fear has been established to imply a bottom.
The detrended Rydex Ratio (0.17), Open Insider Buy/Sell Ratio (61.6) and percentage of S&P 500 stocks above their 50-day moving averages (42.6) are all neutral.
The S&P 500 is trading at a forward P/E multiple of 16.5x consensus 12-month earnings estimates from Bloomberg of $171.53 per share versus the "rule of twenty" fair value multiple of 17.6x, easing our prior valuation concerns.
The earnings yield stands at 6.1%.
While the markets appear to be slightly undervalued, the state of the charts and data keep our near term "neutral/negative" intact despite of Tuesday's gains.