There's something interesting happening as we examine the market's technicals.
All the charts of the major equity indexes remain in near-term bearish trends while market breadth remains negative as well.
The data, on the other hand, continue to suggest a bounce should be forthcoming. However, while the data signals have intensified, they were suggesting a bounce through all last week as well, while the markets headed south.
Therefore, we believe that some signs of demand overtaking supply on the charts are a requirement to embrace the data signals with greater confidence.
Checking the Charts
All the major equity indexes closed lower Friday with negative NYSE and Nasdaq internals as all closed near their lows of the session as well as violating their support levels.
The net result was the charts remain in downtrends that have yet to generate suggestions of a reversal of the recent weakness.
Market cumulative breadth continued to erode as well with the advance/decline lines for the All Exchange, NYSE and Nasdaq negative and below their 50-day moving averages.
The stochastic levels remain very oversold. But like the data, they have had no impact on stemming the outgoing tide thus far.
Data Intensify Positive Signals
The data continue to intensify positive signals. Yet the encouragement they offered last week failed to result in some relief from weakness that is usually the case when the data is at these levels.
The McClellan Overbought/Oversold Oscillators are extremely oversold and still implying a bounce (All Exchange: -124.56 NYSE: -143.32 Nasdaq: -113.67).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) dropped to 34% and remains neutral versus its prior cautionary implication at 84% near the market's recent highs.
The Open Insider Buy/Sell Ratio rose to 79.3%, staying neutral as well, as insiders continued their buying on weakness.
The detrended Rydex Ratio (contrarian indicator) dropped to -1.26, staying bullish.
Last week's AAII Bear/Bull Ratio (contrarian indicator) rose to 1.25 and remained mildly bullish.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) was 29.6/45.1 neutral with an increase in bears.
S&P 500 Now 'Fairly Valued'
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 rose to $233.06 per share from $232.68. As such, the S&P's forward multiple is down to 16.8x matching the "rule of 20" ballpark fair value at 16.8x.
The S&P's forward earnings yield is 5.94%.
The 10-Year Treasury yield closed higher at 3.19% and above resistance. We now view support at 3.02% with resistance at 3.31%
While the data is still flashing bright green lights, their impact of offering relief from selling pressure has yet to be seen. This is somewhat rare in our experience and suggests some improvement in market action is required to embrace the data more fully.