The indices closed mixed Monday with the S&P 500, DJIA, Nasdaq Composite and Nasdaq 100 posting gains as the rest closed down on the day.
Internals were generally negative with the exception of the Nasdaq seeing positive up/down volume but on negative breadth.
Trading volumes declined on both exchanges from the prior session.
While no violations of support or resistance were registered, the S&P, MidCap 400 and Value Line Arithmetic Index flashed bearish stochastic crossover signals as did the Nasdaq Composite and Nasdaq 100 in the preceding session. We do not view them as actionable right now, but they raise a slight cautionary flag.
Cumulative breadth remains neutral on the All Exchange NYSE and Nasdaq.
Regarding the data, the McClellan one-day Overbought/Oversold Oscillators remain neutral (All Exchange: -26.11 NYSE: -32.5 Nasdaq: -21.22).
The leveraged ETF traders, measured by the detrended Rydex Ratio (contrarian indicator), remain neutral at 0.76 as well.
This week's Investors Intelligence Bear/Bull Ratio (contrary indicator) changed slightly to a mildly bearish 19.6/55.9 from its prior bearish level. The overly optimistic expectations have moderated slightly.
The Investors Intelligence Bear/Bull Ratio is 19.6/55.9 (mildly bearish)
The Open Insider Buy/Sell Ratio saw some slight improvement as well, moving from bearish to neutral at 27.9. It is a welcome change, in our opinion, but not a game changer at this point.
Valuation still appears extended with the forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg rising to $174.95 per share, leaving the S&P's forward P/E multiple at 22.5x, while the "rule of 20" finds fair value at 18.3x. We reiterate the valuation spread has been consistently wide over the past several months while the forward estimates have risen rather consistently.
The S&P's forward earnings yield stands at 4.4%.
The 10-year Treasury yield dipped to 1.68% but remains in a short-term uptrend. We are monitoring it closely as it has been having rather significant influence on the equity markets of late.
The mixed chart trends, tepid market breadth and generally neutral data suggest we maintain our "neutral" near-term macro-outlook for the equity markets in general.