The near-term trends of the major equity indices are a mix of neutral and positive while there was some deterioration in breadth over the past week. The data is generally neutral.
Meanwhile, the yield on the 10-Year Treasury lifted to our technical target around the 1.7% level that, in our opinion, has the potential to put some pressure on valuation.
So, where does this leave us for the near term?
On the Charts
The S&P 500 and DJIA closed lower Friday as the rest posted gains.
The Nasdaq saw positive breath while the NYSE had positive breadth but negative up/down volume.
The DJIA closed below its near-term uptrend line and is now neutral as are the Nasdaq Composite (see above) and Nasdaq 100 with the rest of the indices positive.
Market breadth deteriorated a bit over the past week with the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq all neutral.
The Nasdaq Composite and Nasdaq 100 flashed bearish stochastic crossover signals but are not yet actionable as support levels have not yet been violated.
Regarding the data, the McClellan one-day Overbought/Oversold Oscillators remain neutral (All Exchange: -16.36 NYSE: -22.06 Nasdaq: -12.62).
The leveraged ETF traders measured by the detrended Rydex Ratio (contrarian indicator) remain neutral at 0.7 as well.
Last week's Investors Intelligence Bear/Bull Ratio (contrary indicator) changed slightly at a bearish 20.6/51.9, suggesting too much optimism still exists on the part of investment advisors.
The Open Insider Buy/Sell Ratio at 24.4 saw some lift in insider buying interest but remains in bearish territory.
Valuation still appears extended with the forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg of $174.24 per share, as of our last reading, leaving the S&P's forward multiple at 22.5x, while the "rule of 20" finds fair value dropping to 18.3x. 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 has dipped to 4.45%.
The 10-year Treasury yield rose to 1.73%, hitting our technical target at the 1.7% level. Its next technical resistance level would be around 1.85%, in our view.
The action on the charts combined with the data dashboard and lift in the 10-year Treasury yield suggest we maintain our near-term "neutral" outlook for equities as a whole.