With minor market weakness Thursday, most of the data has returned to neutral readings. Even so, no sell signals were generated on the charts.
On the Charts
Only the Dow Jones Transports managed to post a gain Thursday as the rest of the equity indices saw declines on negative breadth but declining trade volume. However, no sell signals were generated on the charts, although the Nasdaq 100 (see below) did close below its short-term uptrend line. The rest remain in their short-term uptrends.
Market breadth remains positive as the cumulative advance/decline lines for the All Exchange, NYSE and NASDAQ remain in uptrends as well.
The stochastic levels continue to reside in overbought territory but have yet to flash bearish crossover signals. They are capable of staying overbought for extended periods.
Data Returns to Mostly Neutral Levels
The 1-day McClellan Overbought/Oversold Oscillators (All Exchange:+38.57/+98.32 NYSE:+38.77/+120.13 NASDAQ:+38.77/+80.28) are showing neutral readings.
The OEX Put/Call Ratio (1.11) has also turned neutral as is the detrended Rydex Ratio at +0.25.
We view the lack of investor exuberance with the AAII Bear/Bull Ratio remaining at a neutral 26.0/35.0 as a positive.
Valuation Spread Shrinks
While the spread between current S&P 500 valuation and "fair value" has shrunk from over 200 basis points to 80 over the past few weeks, the index has risen.
The S&P is trading at a forward P/E of 16.6x consensus 12-month estimates from Bloomberg of $167.53 per share, versus the "rule of 20" implied fair value multiple of 17.4x.
The earnings yield stands at 6.04%.
We have yet to see sell signals appear on the charts, which remain in uptrends with positive breadth. And with the data sending a generally neutral signal, we are maintaining our near-term "positive" outlook for the major equity indices.