With all the charts of the major equity indexes near-term bullish and above their 50-day moving averages, what's not to like?
Cumulative breadth remains healthy as well.
Well, the McClellan 1-day overbought/oversold levels are flashing yellow lights while the S&P 500's forward 12-month consensus estimates dropped to a level that now finds the index trading at a premium to its ballpark fair value.
So, while we would definitely not fight the tape, some of the data are suggesting more opportune buying junctures may be forthcoming.
Checking Out the Charts
Chart Source: Worden
All the major equity indexes closed higher Friday with positive internals on the NYSE and Nasdaq as NYSE volumes rose and Nasdaq volumes dipped from the prior session.
All closed near their intraday highs with the S&P 500 (see above), DJIA, Nasdaq Composite, Nasdaq 100, Dow Jones Transports and Value Line Arithmetic Index closing above their respective resistance levels. So, all the near-term trends remain bullish on the charts and above their 50-day moving averages.
Cumulative market breadth continues to strengthen and remains positive on the All Exchange, NYSE and Nasdaq.
All the charts are overbought from a stochastic perspective but have yet to generate bearish crossover signals.
Digging Into the Data
The McClellan Overbought/Oversold Oscillators pushed deeper into overbought territory with the NYSE extremely so (All Exchange: +96.06 NYSE: +133.37 Nasdaq: +69.83). They are at cautionary levels.
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) remains neutral, lifting to 76%.
The Open Insider Buy/Sell Ratio dipped to 49.9, also staying neutral.
The detrended Rydex Ratio (contrarian indicator) lifted slightly to -0.92 and remains mildly bullish versus its previous bullish status a few weeks ago.
Last week's AAII Bear/Bull Ratio (contrarian indicator found the crowd staying very fearful, at 1.86 and very bullish.
However, the Investors Intelligence Bear/Bull Ratio (contrary indicator) moderated to neutral with the bears and bulls being dead even at 35.2/35.2.
S&P 500 Trades at a Premium
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 dropped notably to $233.20 per share. As such, the S&P's forward P/E multiple rose to 17.7x and is now at a slight premium to the "rule of 20" ballpark fair value at 17.4x.
The S&P's forward earnings yield dropped to 5.65%.
The 10-Year Treasury yield closed lower at 2.64%. We view support as 2.49% and resistance at 2.92%.
Our Market Outlook
The strong market lift over the past several sessions has yet to show any signs of abating from a chart perspective. Yet, while we would not fight the tape, current overbought conditions and increase in the valuation multiple suggest some near-term patience may be appropriate, awaiting better buying opportunities.
