The S&P 500 ETF is approaching high-volume resistance Wednesday morning that may be an important factor should it be violated or prove to be a stalling point.
We would also note the split performance of the equity indexes since May, discussed below.
On the Charts
All of the equity indices closed lower Tuesday with negative internals on lighter volume.
All closed at or near their intraday lows but no support levels were violated on the charts, leaving all in near-term neutral/sideways trends with the exceptions of the Russell 2000 and Value Line Arithmetic remaining negative.
Regarding trends, one issue that has been bothering us is the split performance within the indices since last May. While the large-cap indices, including the S&P 500 have made higher lows and higher highs, the Dow Jones Transports, Value Line and Russell have done the opposite by establishing a series of lower highs and lower lows. This lopsided performance is one reason why the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq remain neutral with the All Exchange and Nasdaq below their 50-day moving averages.
Currently, "high volume at price" (VAP) levels are seen as resistant on the Nasdaq Composite, Transports, S&P MidCap 400 and Value Line indices. They are supportive on the DJIA and Nasdaq 100.
Digging Into the Data
The data is neutral including all of the one-day McClellan Overbought/Oversold Oscillators (All Exchange:+1.62 NYSE:+1.39 Nasdaq:+3.37).
The detrended Rydex Ratio (contrary indicator) remains neutral at -0.4 as is the percentage of S&P 500 stocks trading above their 50-day moving averages at 38.2.
Tuesday's AAII Bear/Bull Ratio (contrary indicators) has actually turned bullish as the crowd now finds bears outnumbering bulls 38.6/27.33.
The Open Insider Buy/Sell Ratio remains neutral at 82.3.
Valuation continues to be attractive with the 12-month forward consensus earnings estimate from Bloomberg for the S&P 500 at $172.12 per share, leaving the forward P/E multiple at 16.9x while the "rule of twenty" finds fair value at 18.4x.
The 10-year Treasury yield is 1.53%.
The earnings yield stands at 5.93%.
While valuation looks appealing, mixed market breadth and index performance combined with the data suggest we maintain our near-term "neutral" outlook for the major equity indices.