Wednesday's trading will be all about the June CPI report released this morning. But how were the charts and data lining up prior to the release?
Recent chart improvements to the major equity indexes and market sentiment offer upside projections although more chart improvements are necessary in order to be more confident in that regard.
Let's see how things might shake out from here.
On the Charts
The major equity indexes closed lower Tuesday with negative NYSE and mixed Nasdaq internals. However, no chart events occurred to alter their near-term neutral patterns.
Support levels were tested on the S&P 500 (see above), Nasdaq Composite, Nasdaq 100 and Value Line Arithmetic Index.
While market cumulative breadth remains neutral for the All Exchange, NYSE and Nasdaq, the Nasdaq Composite and Nasdaq 100 yielded warning signals in the form of bearish stochastic crossover signals being triggered.
The McClellan Overbought/Oversold Oscillators remain neutral (All Exchange: +7.4 NYSE: +1.09 Nasdaq: +11.89).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) dipped to 20% and is now mildly bullish.
The Open Insider Buy/Sell Ratio slid to 33.5 but also stayed neutral as insiders have backed off from buying over the past few sessions.
The detrended Rydex Ratio (contrarian indicator) dropped to 1.82 and remains bullish as the leveraged ETF traders increased their already heavy short exposure.
This week's AAII Bear/Bull Ratio (contrarian indicator) saw the crowd staying very fearful, at 2.63 and very bullish.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) saw a drop in bulls and is very bullish at 40.3/30.5. Three times in the past decade, such readings have marked market lows, most followed by notable rallies.
The Investors Intelligence Survey is 4030/30.5 (very bullish)
S&P 500 Valuation and Treasury Yields
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 has dipped to $239.27 per share. As such, the S&P's forward P/E multiple is 16.0x and at a slight discount to the "rule of 20" ballpark fair value at 17.0x.
The S&P's forward earnings yield is 6.27%.
The 10-Year Treasury yield closed lower at 2.96. We view support as 2.8% and new resistance at 3.15%.
Our Near-Term Market Outlook
The CPI numbers will rule the day. With that said, the current charts and data leave us neutral with some expectations of improvement given sentiment and valuation.