Despite Friday's bullish action, it was not enough to shift the scales, in our view.
The McClellan Oscillators that implied a pause/bounce from recent weakness last week are now mostly neutral -- as is the bulk of the data dashboard. Meanwhile, valuation continues to appear extended while investment advisor sentiment (a contrary indicator) remains overly bullish.
No high-volume overhead resistance levels were violated on the charts last week. These resistance levels need to be violated for us to become more positive in our outlook.
On the Charts
All the equity indices closed higher Friday with positive internals on lighter volume.
The Nasdaq Composite and Nasdaq 100 (see above) closed above their near-term downtrend lines and are now neutral with the Dow Jones Transports positive and the rest negative.
Cumulative breadth remains weak with the All Exchange, NYSE and Nasdaq in negative trends and below their 50-day moving averages.
We believe the charts need to see closes above their high-volume resistance levels to be more positive. Otherwise, the moves may turn out to be rallies to resistance that fail. Monday's close may help resolve that question.
Data Remain Mixed
The one-day McClellan Overbought/Oversold Oscillators are now mostly neutral, except the NYSE, which remains somewhat oversold, after forecasting a pause/bounce last week from the preceding weakness (All Exchange: -43.13 NYSE: -55.79 Nasdaq: -32.57).
The Open Insider Buy/Sell Ratio is neutral at 52.4 while the detrended Rydex Ratio (contrary indicator) remains neutral at +0.39 as the leveraged ETF traders continue to be somewhat evenly balanced in their long/short exposure.
Last week's Investors Intelligence Bear/Bull Ratio (contrary indicator) continued its bearish signal at 18.36/54.8 that may be the beginning of an important sentiment shift as recently discussed in these notes. New numbers will be released Tuesday for that data point.
The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages is neutral at 32.9%.
The valuation gap remains extended, in our opinion, with the S&P 500 trading at a P/E multiple of 22.6x consensus forward 12-month earnings estimates from Bloomberg of $145.99 per share while the "rule of 20" finds fair value at 19.3x.
The S&P's forward earnings yield is 4.43% with the 10-year Treasury yield at 0.6%.
Friday's positive action did little to change the general cautionary landscape, in our opinion. Closes above high-volume resistance may be required to brighten that outlook.