Indices may have to earn their stripes by posting strong earnings going forward.
Market data remains largely neutral although we now find the S&P 500 very close to fair value while investment advisors have shifted to the point of being a bit overly bullish.
On the Charts
All of the major equity indices closed higher Tuesday with positive internals on heavier trading volumes.
The S&P 500, Nasdaq Composite and Nasdaq 100 (see above) all managed to make new closing highs while the DJIA closed at resistance.
However, the trends remain unchanged with the S&P MidCap 400, Russell 2000 and Value Line Arithmetic Index remaining neutral with the remainder in uptrends.
The Nasdaq cumulative advance/decline line turned positive from neutral as are the All Exchange and NYSE.
So far, we have not seen any warning signals of note from a technical viewpoint.
The data remain largely neutral, including all of the one-day McClellan Overbought/Oversold Oscillators (All Exchange:-3.33 NYSE:-6.07 NASDAQ:+0.81).
The Open Insider Buy/Sell Ratio remains neutral at 39.2, although insiders have curbed their buying appetite notably.
The percentage of S&P 500 stocks trading above their 50-day moving averages is neutral with a 73.3% reading.
Crowd sentiment has shifted a bit. The detrended Rydex Ratio (0.7) and new AAII Bear/Bull Ratio (23.0/37.33) remain neutral. However, the Investors Intelligence Bear/Bull Ratio (contrary indicator) shows investment advisors becoming slightly overly bullish at 19.2/54.8 now that some indices are posting new highs.
The S&P 500 is trading at a forward P/E multiple of 17.1x consensus 12-month earnings estimates from Bloomberg $171.90 per share, while the "rule of twenty" fair value multiple is at 17.4x. As such, this now suggests the S&P is essentially fairly valued at current levels.
While we are maintaining our near-term market outlook at "neutral/positive," advisor sentiment combined with valuation suggest have our guard up.