The pause that doesn't refresh?
Thursday's pause in the stock market's recent swoon did nothing to alter our concerns regarding the charts, data, advisor sentiment and valuation.
On the Charts
All the equity indices closed higher Thursday with negative breadth but positive up/down volumes.
The only technical event of note was the Dow Jones Transports (see above) closing below its near-term uptrend line that had been in force since its June low. It is now considered a neutral trend as the rest remain negative and below their 50-day moving averages.
The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain negative and below their 50 DMAs as well.
We have yet to see any chart signals suggesting a shift from their current status.
The one-day McClellan Overbought/Oversold Oscillators remain oversold after suggesting pause/bounce potential Thursday morning (All Exchange: -91.6 NYSE: -103.7 Nasdaq: -83.51). While a pause was generated, the fact that the indices advanced on negative breadth leaves said pause as questionable.
The Open Insider Buy/Sell Ratio is neutral at 49.3 while the detrended Rydex Ratio (contrary indicator) remains neutral at +0.35 with the leveraged ETF traders continuing to be somewhat evenly balanced in their long/short exposure.
This week's Investors Intelligence Bear/Bull Ratio (contrary indicator) continues its bearish signal at 18.36/54.8, which may be the beginning of an important sentiment shift as we've recently discussed here.
The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages is neutral, dipping to 24.0%.
The valuation gap remains extended, in our opinion, with the S&P 500 trading at a P/E multiple of 22.2x consensus forward 12-month earnings estimates from Bloomberg of $146.04 per share, while the "rule of 20" finds fair value at 19.3x.
The S&P's forward earnings yield is 4.5% with the 10-year Treasury yield at 0.67%.
Thursday's pause from recent market weakness as implied by the OB/OS is somewhat suspect, in our opinion, as the advances took place with negative breadth. Meanwhile, the charts, valuation and advisor sentiment remain concerning, leaving our near-term "negative" outlook intact.