Four of the index charts suffered further technical damage Wednesday while cumulative market breadth remains negative.
Near-term index trends remain mixed while the data has shown some slight improvement but not enough to alter our near-term "neutral/negative" macro-outlook for equities. We have yet see any possible bottoming signals from the recent market slide, that would result in more sanguine expectations.
On the Charts
All the major equity indices closed lower Wednesday with negative internals on the NYSE and Nasdaq as all closed at or near their intraday lows as in the prior session.
Technical damage occurred on the S&P 500 (see above) as it closed below its uptrend line and support level.
The DJIA closed below its uptrend line and is now neutral as is the S&P.
The Nasdaq Composite closed below its 50-day moving average while the Nasdaq 100 closed below support and is now back below its near-term downtrend line.
So, regarding trend, the Nasdaq 100 and Russell 2000 are negative, the S&P, DJIA and Nasdaq Composite neutral, and the rest positive.
Cumulative market breadth remains negative as well on the All Exchange, NYSE and Nasdaq.
Of possible interest is the fact that none of the stochastic levels are below 20, which would be a setup for possible bullish crossovers.
The net result is we have yet to see technical signals that would imply a near-term bottom has been achieved.
Regarding the Data
The McClellan one-day Overbought/Oversold Oscillators that were oversold Wednesday morning failed to produce the expected bounce. They are now more oversold, suggesting another attempt (All Exchange: -75.35 NYSE: -46.15 Nasdaq: -98.39).
The Open Insider Buy/Sell is still bothersome as its bearish 18.8 reading continues to suggest insiders remain active sellers.
The leveraged ETF traders measured by the detrended Rydex Ratio (contrarian indicator) improved to a neutral 0.67. However, significant market upturns have typically occurred when they have been heavily leveraged short, which is not the current case.
This week's Investors Intelligence Bear/Bull Ratio (contrary indicator) was little changed at a bearish 18.5/56.3 suggesting too much optimism exists on the part of investment advisors.
S&P 500 Valuation
Valuation still appears extended, but a little less so. The forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg lifting to $173.63 per share, leaves the S&P's forward P/E multiple at 22.0x, while the "rule of 20" finds fair value at 18.5x. The valuation spread has been consistently wide over the past several months while the forward estimates have continued to rise consistently.
The S&P's forward earnings yield is 4.55%.
The 10-year Treasury yield rose to 1.47% after fulfilling our expectation of a move to the 1.5% level last week.
We are not yet convinced the markets have completed their current correction.