Where does the latest much-anticipated and talked about Fed rate-hike decision leave the markets?
All the major equity indexes closed lower Wednesday and near the midpoints of their intraday ranges, leaving all the current near-term trends a mix of neutral and bullish implications.
So, for all the angst over the Fed rate hike announcement it appears to have had little, if any, impact for the indexes at the close.
Meanwhile, the data remain largely non-threatening. The one shadow overhanging the markets, in our opinion, continues to be that of valuation (see below).
Fed Hike Leaves Charts Mostly Neutral
Chart Source: Worden
On the charts, all the major equity indexes closed lower Wednesday with negative NYSE and Nasdaq internals as trading volumes declined on both.
Importantly, no violations of support or trend were registered on the charts at the close despite the typical wild swings after a Fed announcement.
As such, the S&P 500 (see above) and Nasdaq 100 remain near-term bullish with the rest in neutral patterns.
The same can be said for cumulative market breadth that stayed neutral for the All Exchange, NYSE and Nasdaq.
All the stochastic levels are neutral as well except for the Russell 2000, which joined the rest of the charts that recently registered bullish stochastic crossover signals.
Data Remains Non-Threatening Except For Valuation
On the data front, the McClellan Overbought/Oversold Oscillators remain neutral (All Exchange: -7.64 NYSE: -6.54 Nasdaq: -7.33).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) slipped to 78%, turning neutral from mildly bearish.
The Open Insider Buy/Sell Ratio saw a dip to 61.5% as insiders pulled back on their recent buying, staying neutral.
The detrended Rydex Ratio (contrarian indicator) dropped slightly to -0.87 and remains mildly bullish.
This week's AAII Bear/Bull Ratio (contrarian indicator) moved higher to 1.57 as bearish sentiment increased and remains on a bullish signal.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) saw a rise in bears and bulls, staying neutral at 32.9/43.8.
Earnings Estimates Continue to Slide
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 continued to slide down to $224.24 per share. As such, its forward P/E multiple stands at 17.8x and remains at a premium to the "rule of 20" ballpark fair value of 16.5x.
The S&P's forward earnings yield rose to 5.61%.
The 10-Year Treasury yield closed fractionally higher and essentially unchanged at 3.5%. It is in a negative short-term trend with support at 3.29% and resistance at 3.69%, by our analysis.
Near-Term Outlook
The highly anticipated rate hike by the Fed Wednesday turned out to be somewhat of a non-event as its impact on the charts and data was minimal. As such, the charts and data scales seem rather evenly balanced with the outlier being a somewhat extended valuation. Thus, we remain of the opinion that equity weakness should be bought near support levels when available.
