All the major equity indexes closed lower Wednesday with negative NYSE and Nasdaq internals as NYSE volumes rose and Nasdaq volumes dipped from the prior session. All closed at or near their intraday lows.
While there were a few negative signals on the charts as a result of the action, most were unaffected regarding trend and support levels, leaving near-term trends a mix of neutral and bullish projections.
We remain buyers on weakness near support.
The McClellan OB/OS Oscillators Moderated Notably
On the charts, all the major equity indexes closed lower yesterday with broadly negative internals on the NSYE and Nasdaq as all closed at or near their intraday lows. Yet, the size of the declines did less damage to the charts, in our opinion, than might be expected.
McClellan Oscillators Are Neutral
The McClellan OB/OS Oscillators moderated notably and are all neutral versus their prior warning signals. (All Exchange: +14.82 NYSE: +36.74 Nasdaq: +0.46).
The % of SPX issues trading above their 50 DMAs (contrarian indicator) dropped to 57%, staying neutral.
The Open Insider Buy/Sell Ratio lifted to 41.7, also staying neutral as insiders did a little buying.
Importantly, in our opinion, the detrended Rydex Ratio, moved deeper into very bullish territory at -2.15 as leveraged short sellers remain very extended in their leveraged short exposure.
This week's AAII Bear/Bull Ratio dipped to 1.69 but also remained on a very bullish signal as is the Investors Intelligence Bear/Bull Ratio (contrary indicator page 8) at 37.3/35.8 as bears continue to outweigh bulls.
S&P 500 Valuation and Yields
The forward 12-month consensus earnings estimate from Bloomberg for the S&P dipped again $226.03. As such, its forward p/e is 16.6 and at a premium to the "rule of 20" ballpark fair value of 15.9.
The S&P forward earnings yield is 6.03%.
The 10-year Treasury yield closed higher at 4.15%. We view support as 3.97% with resistance at 4.43%.
Our Market Outlook
We continue to believe, given the state of the charts, OB/OS levels and sentiment when compared to valuation, that buying weakness near support remains appropriate.