Amid a bank stocks selloff, all the major equity indexes closed near their intraday lows Thursday as each violated its support level that shifted all the near-term trends to bearish. Multiple daily moving averages were violated as well.
However, we would note NYSE down volume swamped up volume by greater than 10:1, which is sometimes seen at washouts. Yet market cumulative breadth remains bearish as well.
While the McClellan 1-day OB/OS Oscillators moved deeper into oversold territory, suggesting some possible stabilization, they are being somewhat counterbalanced by the extended valuation of the S&P 500, and the Open Insider Buy/Sell ratio remains bearish.
Here's what's happening with the charts and data.
All Indexes Break Support and Turn Bearish
Chart Source: Worden
On the charts, all the major equity indexes closed near their session lows Thursday and below their respective support levels with negative NYSE and Nasdaq internals that saw higher trading volumes.
As such, all the indexes are now in near-term bearish trends as are the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq.
The S&P 500 (see above), DJIA, Midcap 400, Russell 2000 and Value Line Arithmetic Index closed below their 50-day moving averages while the S&P 500, DJIA and Nasdaq Composite violated their 200 DMAs as well.
The stochastic levels are now oversold for the Midcap, Russell and Value Line indexes but have yet to register bullish crossover signals.
NYSE McClellan OB/OS Oscillator Deeply Oversold as Insiders Do Minor Buying
On the data dashboard, the 1-Day McClellan Overbought/Oversold Oscillators moved deeper into oversold territory with the NYSE very oversold (All Exchange: -96.3 NYSE: -109.18 Nasdaq: -88.72), implying some potential pause of weakness.
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) dropped to 25% and is neutral. A reading below 20% would be bullish.
The Open Insider Buy/Sell Ratio rose to 19.9 for the second day in a row. However, it remains well inside bearish territory as insiders have recently been sellers of weakness.
The detrended Rydex Ratio (contrarian indicator) rose to -0.10, staying neutral.
This week's AAII Bear/Bull Ratio (contrarian indicator) rose to 1.42 as bearish sentiment saw a sizable increase and is now bullish.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) is neutral at 28.8/38.4.
Valuation Remains a Problem
Valuation remains problematic despite the forward 12-month consensus earnings estimates from Bloomberg for the S&P 500 lifting to $220.27 per share. While the S&P's valuation spread has narrowed to a P/E multiple of 17.8x versus the "rule of 20" ballpark fair value at 16.1x, it remains quite wide and, in our opinion, still suggests a high level of potential risk exists.
The SPX forward earnings yield is 5.62%.
The 10-year Treasury yield closed lower at 3.93. It is short-term neutral with support at 3.90% and resistance at 4.13%, by our work.
Our Market Outlook
Glimmers of hope are coming from the OB/OS that suggest some possible pause in the recent market slide. But the charts, market breadth, insider activity and valuation continue to suggest some caution is warranted until more evidence is presented to suggest the correction has been completed.