As signs of distribution seem to be appearing, our sense of caution is starting to be rekindled.
What are the charts and data indicating?
On the Charts
All of the major equity indices posted losses Friday with negative internals on higher volume.
No support levels were violated but the S&P 500, Nasdaq Composite, Nasdaq 100 and Dow Jones Transports closed back below their 50-day moving averages that they had recouped in the prior session.
Therefore, all of the indices are below their 50 DMAs with all in neutral trends with the one exception of the DJIA's remaining negative.
The cumulative advance/decline lines have shifted a bit with the All Exchange and Nasdaq back to neutral while the Nasdaq has closed below its 50 DMA.
The NYSE A/D remains positive and above its 50 DMA.
The data remains neutral, including the one-day McClellan Overbought/Oversold Oscillators (All Exchange:-36.55 NYSE:-37.0 NASDAQ:-39.32).
The detrended Rydex Ratio (-0.09), Open Insider Buy/Sell Ratio (64.3) and percentage of S&P 500 stocks above their 50-day moving averages (46.7) are all neutral as well.
Sentiment still remains mostly cautionary with the AAII Bear/Bull Ratio showing the crowd slightly overly bullish at 21.33/38.33 while the Investors Intelligence Bear/Bull Ratio (contrary vindicator) is negative at 17.8/55.5 as of last Tuesday's weekly readings.
The S&P 500 is trading at a forward P/E multiple of 16.7x consensus 12-month earnings estimates from Bloomberg of $171.53 per share, versus the "rule of twenty" fair value multiple of 17.6x. This eases our prior valuation concerns when the S&P was trading at fair value a few weeks ago.
The earnings yield stands at 6.0%.
Friday's late-day selling was not sufficient to warrant a shift in our near-term "neutral" outlook for the major equity indices as the data remains neutral. However, some signs of distribution seem to be appearing, thus causing us to raise our cautionary antennas should more clouds begin to gather.