All the major equity indices closed higher Thursday with positive internals on the NYSE and Nasdaq and higher trading volumes.
The charts saw some improvements as the Nasdaq 100 (see below) and S&P MidCap 400 closed above their near-term resistance levels. We had viewed the Nasdaq 100's resistance as an important technical barrier that, in our view, now improves its outlook.
Meanwhile, the Nasdaq Composite closed back above its near-term uptrend line and is back to positive as are the Nasdaq 100, MidCap 400 and Value Line Arithmetic Index. The rest of the indices remain in neutral trends.
Cumulative breadth also improved, with the All Exchange, NYSE and Nasdaq cumulative advance/decline lines now being neutral and above their 50-day moving averages.
The data continues to send a generally neutral message including the one-day McClellan Overbought/Oversold Oscillators on the All Exchange, NYSE and Nasdaq, in spite of Thursday's strength (All Exchange: +35.84 NYSE: +29.42 Nasdaq: +40.87).
The Open Insider Buy/Sell Ratio remains neutral at 63.9 and has seen a slight rise in buying activity on the part of insiders over the past few sessions.
The detrended Rydex Ratio (contrary indicator) is neutral at +0.04.
This week's AAII Bear/Bull Ratio (contrary indicators) at 45.57/30.12 remains bullish as the crowd continues to be skeptical of the recent market advances.
The counterintuitive percentage of S&P 500 issues trading above their 500day moving averages is also neutral at 52.5%.
Valuation continues to be our greatest concern with the S&P 500 trading at a P/E of 21.9x consensus forward 12-month earnings estimates from Bloomberg of $131.28 per share, versus the "rule of 20" fair value multiple of 19.3x, suggesting the index remains overvalued.
The S&P's forward earnings yield is 4.56%, while the 10-year Treasury yield is at 0.63%.
The data and charts suggest we maintain our near-term "neutral/positive" outlook for the equity markets even as valuation remains a concern.