Where to next? Let's check the dashboard while keeping our eyes on the road ahead.
All the major equity indices closed higher Thursday with positive internals.
While no violations of resistance or trend were registered, the S&P 500 (see below), DJIA, Nasdaq Composite and Nasdaq 100 all saw successful tests of their near-term support levels and closed near their intraday highs. However, they have been making a series of lower intraday highs from their Oct. 12 peaks.
All the indices remain in near-term neutral trends except for the Dow Jones Transports and Value Line Arithmetic Index, which remain bullish.
Breadth improved slightly, which was sufficient to shift the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq from negative to neutral.
All the index charts remain on bearish stochastic crossover signals.
The data are little changed.
The one-day McClellan Overbought/Oversold Oscillators remain neutral (All Exchange: -1.49 NYSE: +0.94 Nasdaq: -3.82).
Psychology continues to be of some concern, as the Open Insider Buy/Sell Ratio lifted to a neutral 39.8, while the Rydex Ratio (contrarian indicator) remains bearish with the leveraged ETF traders extended in their leveraged long exposure at a bearish 1.12 and this week's Investors Intelligence Bear/Bull Ratio (contrary indicator) staying bearish at 21.2/56.6.
We continue to monitor the high levels of bullish opinions on the part of investment advisors and leveraged ETF traders as potential cautionary signals as they leave little room for disappointment on their part, in our view.
The valuation gap remains extended with the S&P 500 trading at a P/E multiple of 22.2x consensus forward 12-month earnings estimates from Bloomberg of $155.76 per share, while the "rule of 20" finds fair value at 19.2x.
The S&P's forward earnings yield is 4.54% and the 10-year Treasury yield rose further to 0.85%.
We have yet to see enough evidence presented to alter our current near-term "neutral" outlook for the equity markets.