Notable bottom signals have yet to appear on the charts of the major equity indices. On the other hand, the sentiment data continues to flash bright green lights as it remains at decade levels of readings coincident with major market bottoms.
Indeed, this sentiment data which has been spot on multiple times over the past 10 years.
On the Charts
All the major equity indices closed lower Monday with negative internals, keeping all in their near-term downtrends.
No technical evidence of a bottoming formation has appeared at this stage. The S&P 500, DJIA, Nasdaq Composite and Dow Jones Transports closed below support.
However, the Nasdaq 100, S&P MidCap 400 and Value Line Arithmetic Index (see below) all held support with the Value Line actually making a higher intraday low on this broad and non-market weighted index. While not technically significant at this point, it does offer a slight ray of hope, in our opinion.
Cumulative breadth remains negative.
On the Other Hand...
The data continues to send some very strong bullish signals, particularly from the investor sentiment section.
The All the McClellan one-day McClellan Overbought/Oversold Oscillators remain oversold but have been so throughout the decline (All Exchange:-79.2 NYSE:-98.49 Nasdaq:-61.78).
The Open Insider Buy/Sell Ratio (see below) at 334.1 continues to find insiders at their historically highest levels of buying over the past decade.
They are loading the boat while the detrended Rydex Ratio (contrary indicator) at -3.69 is near a decade high of ETF trader leveraged short exposure.
In the past decade, this insider/Rydex setup has consistently resulted in marking an important market bottom four out of four times. That is a track record we cannot ignore.
The Open Insider Buy/Sell Ratio is 334.1% (very bullish)
The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages is bullish at 1.2%.
The S&P 500 is trading at a P/E multiple of 13.5x consensus forward 12-month earnings estimates from Bloomberg of $165.22 per share with the "rule of 20" fair value multiple at 19.2x. This still suggests the S&P remains significantly undervalued.
The S&P's forward earnings yield is 7.48%, while the 10-year Treasury yield is at 0.76%.
We need to see some violations of resistance and downtrends on the charts to become more positive in our outlook. Nonetheless, the strong signals coming from the data have us keeping our near-term "neutral/positive" outlook.