The major equity indices closed mixed Thursday with the S&P 500, Nasdaq Composite, Nasdaq 100 and S&P MidCap 400 posting gains as the rest declined.
The S&P (see below) did manage to close above near-term resistance, turning its near-term trend positive. However, that achievement, as well as the other gains, came on negative breadth and increased negative up/down volume. As such, said gains are bit suspect as they imply a narrowing of participants.
On the other hand, the Dow Jones Transports closed back below its short-term uptrend line, turning that trend to neutral.
So, all of the near-term chart trends are neutral with the exception on the S&P being positive.
Some concern remains regarding the stochastic levels as all are overbought with the exception of the DJIA that recently gave a bearish signal. The stochastics tend to regularly move to oversold from overbought. Therefore, their current levels suggest potential for retracement.
We would also note the VIX is back near its lowest levels over the past year that have been followed by periods of increased volatility.
The data remains mostly neutral including all of the one-day McClellan Overbought/Oversold Oscillators (All Exchange:+32.37 NYSE:+35.1 Nasdaq:+30.9).
The detrended Rydex Ratio (contrary indicator) is bullish at -1.33 suggesting a more cautious crowd outlook.
This week's AAII Bear/Bull Ratio (contrary indicators) remains bullish at 38.0/24.67, echoing the Rydex data.
However, the Investor's Intelligence Bear/Bull Ratio (contrary indicator) remained bearish at 17.0/49.1, 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 66.5% as is the Open Insider Buy/Sell Ratio at 42.6.
Valuation is appealing, but continues to compress, with 12-month earnings estimates for the S&P 500 slipping yet again to $172.96 per share, via Bloomberg, leaving the forward P/E multiple at 17.4x while the "rule of twenty" finds fair value at 18.2x. S&P 500 estimates have been shrinking daily over the past several sessions.
The 10-year Treasury yield stands at 1.76%.
The earnings yield is 5.75%.
While we are maintaining our near-term "neutral" outlook for the major equity indices, weakening market breadth, stochastic/VIX levels and declining forward S&P 500 estimates are starting to raise a few yellow flags.