All the equity indices closed higher Thursday with positive internals on lighter trade.
Significant progress was made off the early session lows as buyers stayed in control up to the close, leaving all at or near their intraday highs.
Yet, while the intraday recovery was notable, the gains were not able to push the indices through upside resistance levels or current short-term trends, leaving each of them in neutral trends except for the Nasdaq Composite (see below) and Nasdaq 100, which are positive.
The Dow Jones Transports now finds its stochastic oversold but has yet to signal a bullish reversal.
The cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq are above their 50-day moving averages but are currently in downtrends, describing the recent deterioration of market breadth.
The data remains mostly neutral.
The one-day McClellan Overbought/Oversold Oscillators are neutral on the All Exchange and Nasdaq while the NYSE's is mildly oversold (All Exchange: -41.29 NYSE: -51.59 Nasdaq: -33.33).
The Open Insider Buy/Sell Ratio saw a slight uptick in insider buying but remains neutral at 68.1 as is the detrended Rydex Ratio (contrary indicator) +0.17 with the leveraged ETF traders continuing their indecision as to where to place their market bets.
This week's AAII Bear/Bull Ratio (contrary indicators) at 48.9/26.37 continued to send a bullish message as the crowd has yet to embrace the market's strength from the March lows.
The counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages is also neutral at 51.7%.
Valuation continues to be our largest concern. The S&P 500 is now trading at a P/E of 22.0x consensus forward 12-month earnings estimates from Bloomberg of $129.73 per share, while the "rule of 20" finds the fair value multiple at 19.4x, suggesting the index remains overvalued.
The S&P's forward earnings yield is 4.55% with the 10 -year Treasury at 0.62%.
While Thursday's intraday rally was a welcome relief from the open's weakness, the charts saw no technical events generated to change their combination of neutral and positive trends while the data remains generally neutral as well. When valuation is added to the mix, we believe it appropriate to maintain our near-term "neutral" outlook for the major equity indices.