The major equity indexes closed mixed Tuesday as one more index turned neutral from bullish regarding its near-term trend.
The data dashboard is generally neutral and not yielding any strong implications as to near-term market action probabilities.
We remain of the opinion that the markets are going through a consolidation of the notable gains from the October lows -- and this may be displayed as some sideways action over the near-term. Within that context, we would be buyers of weakness near support levels.
Indexes Close Mixed as Nasdaq Turns Neutral
Chart Source: Worden
On the charts, the major equity indexes closed mixed Tuesday with positive NYSE and Nasdaq internals.
Performance was split with the S&P 500, Nasdaq Composite and Nasdaq 100 posting losses as the rest saw minor gains.
The only technical event of note was the Nasdaq Composite (see above) closing below its near-term uptrend line, turning neutral from bullish, joining the DJIA in that status. The rest remain in near-term uptrends.
There was no change in cumulative market breadth with the advance/decline lines for the All Exchange and NYSE staying positive with the Nasdaq's neutral.
Bearish stochastic crossover signals, however, were generated on the S&P, DJIA, Midcap 400 and Value Line Arithmetic Index.
Data Generally Neutral
The McClellan Overbought/Oversold Oscillators remain neutral, offering little in the way of near-term probabilities (All Exchange: +1353 NYSE: +30.8 Nasdaq: +2.4).
However, the percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) remains in bearish territory at 85% and near peak levels seen only twice in the past two years.
The Open Insider Buy/Sell Ratio dipped to 50.7, staying neutral.
The detrended Rydex Ratio, (contrarian indicator) dropped to -0.67, also staying neutral. We reiterate It has given up its strong bullish implications that were present just prior to the recent rally.
The new AAII Bear/Bull Ratio (contrarian indicator) rose to 1.46, remaining bullish versus its very bullish signal prior to the rally.
The AAII Bear/Bull Ratio is 1.46 (bullish)
Also, the new Investors Intelligence Bear/Bull Ratio (contrary indicator) at 30.5/41.7 remains neutral with bulls now outnumbering bears.
S&P Valuation and Treasury Yields
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 finally saw an uptick to $224.66 per share from $224.32. As such, its forward P/E multiple is 17.6x and remains at a premium to the "rule of 20" ballpark fair value of 16.3x.
The S&P's forward earnings yield rose to 5.68%.
The 10-Year Treasury yield closed higher at 3.75%. We see support as 3.56% with resistance at 3.95%.
Our Market Outlook
While charts remain largely constructive, the overview of the data is at a bit of a stalemate while valuation is a bit rich, in our opinion. Given the massive gains the markets have seen from the October lows, we believe we may be in a consolidation phase that could result in some sideways action for a while. As such, we remain buyers of weakness near support.
