The bulk of the major equity indices closed lower Friday with the exception of the Dow Jones Transports posting a gain, while NYSE internals were modestly positive and those of the Nasdaq were negative.
The one event of note was the Nasdaq Composite (see below) closing below its near-term uptrend line, turning said trend to neutral from positive. As such, we now find the bulk of the near-term trends for the major equity indices in neutral with only the S&P 500 and Nasdaq 100 positive.
This current state of the near-term trends is similar to our concerns noted last week regarding the cumulative advance/decline line for the Nasdaq making a notably lower high during the recent rally, both of which suggest a weakening technical foundation, in our opinion.
The stochastic levels are overbought on all of the indices but have not yet yielded "bearish crossover" signals.
The cumulative advance/decline lines are positive on the All Exchange NYSE and Nasdaq while high "volume at price" (VAP) levels are generally supportive.
The data remains mostly neutral including all of the one-day McClellan Overbought/Oversold Oscillators (All Exchange:+28.54 NYSE:+24.56 Nasdaq:+33.73).
The detrended Rydex Ratio (contrary indicator) is bullish at -1.77 suggesting a more cautious crowd outlook.
Last week's AAII Bear/Bull Ratio (contrary indicators) also turned bullish at 38.67/23.33, echoing the Rydex data. However, the Investor's Intelligence Bear/Bull Ratio (contrary indicator) remained bearish at 17.2/47.6, suggesting an excess of bullish sentiment on the part of investment advisors continues.
The percentage of S&P 500 stocks trading above their 50-day moving averages is a neutral 61.6%. as is the Open Insider Buy/Sell Ratio at 50.5.
Valuation seems appealing, but a bit less so, with 12-month earnings estimates for the S&P 500 slipping again to $173.27 per share, via Bloomberg, leaving the forward P/E multiple at 17.2x while the "rule of twenty" finds fair value at 18.3x. S&P estimates have been shrinking daily over the past several sessions.
The 10-year Treasury yield stands at 1.75%.
The earnings yield is 5.8%.
We have yet to see enough of a shift on the charts and data to alter our near term "neutral" outlook for the major equity indices.