All the major equity indices closed higher Tuesday with positive internals but on lighter trade. No violations of trend or resistance were generated.
However, the S&P 500 (see below) and DJIA closed near their intraday lows after giving up the bulk of their gains earlier in the session as the rest closed near their midpoints.
All the indices, in our opinion, are in near-term neutral trends with the exceptions of the Dow Jones Transports and Value Line Arithmetic Index staying positive.
While breadth was positive, it was not sufficient to alter the current negative trends for the cumulative advance/decline lines on the All Exchange, NYSE and Nasdaq.
The Dow Transports did create a bearish stochastic crossover signal that now leaves only the S&P MidCap 400 and Value Line failing to do so over the past week.
The data remain generally neutral.
The one-day McClellan Overbought/Oversold Oscillators continue their neutral message (All Exchange: -4.21 NYSE: -4.0 Nasdaq: -5.37).
Psychology is still of some concern, in our opinion, as the Open Insider Buy/Sell Ratio lifted to a neutral 34.2 while the Rydex Ratio (contrarian indicator) remains bearish with the leveraged ETF traders extended in their leveraged long exposure at a bearish 1.14.
Meanwhile, this week's Investors Intelligence Bear/Bull Ratio (contrary indicator) remains bearish at 21.2/56.6.
We continue to monitor the high levels of bullish opinions on the part of investment advisors and leveraged ETF traders as potential cautionary signals as they leave little room for disappointment on their part.
The valuation gap remains extended with the S&P 500 trading at a P/E multiple of 22.1x consensus forward 12-month earnings estimates from Bloomberg at $156.04 per share while the "rule of 20" finds fair value at 19.2x.
The S&P's forward earnings yield is 4.53% as the 10-year Treasury yield rose to 0.8%.
We have yet to see enough evidence presented to alter our current near-term "neutral" outlook for the equity markets.