The overall market tone has improved. Indeed, the buying pressure was strong enough Friday to push all but one of the major equity indexes above resistance, turning their near-term trends to bullish from neutral, with only one outlier. Market breadth improved as well.
The data is somewhat evenly balanced between overbought McClellan 1-day OB/OS Oscillators and contrarian indicators that are very bullish.
On the Charts
All the major equity indexes saw notable gains Friday on very heavy trading volume.
Only the Midcap 400 was unable to violate resistance. As such, all the charts, except for the MidCap 400, turned near-term bullish from neutral with the MidCap staying neutral.
Cumulative market breadth also improved, staying positive on the All Exchange NYSE and Nasdaq.
The bullish stochastic crossovers that presaged last week's gains saw one more generated, this time by the Value Line Arithmetic Index.
What we will now be watching for is higher lows to be registered on the charts during the next consolidation. Should that occur, we would be more confident in progress continuing.
Regarding the Data
The McClellan Overbought/Oversold Oscillators are now overbought (All Exchange: +57.7 NYSE: +53.2 Nasdaq: +63.0).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) rose to 22%, approaching the 25% trigger line, remaining bullish.
The Open Insider Buy/Sell Ratio dipped to 71.7 as insiders backed off somewhat from their recent buying, staying neutral.
On the other hand, the detrended Rydex Ratio (contrarian indicator) remains very bullish -2.21 as the leveraged ETF traders continue to be highly leveraged short and represent pent-up demand.
Last week's AAII Bear/Bull Ratio (contrarian indicator) remained very bullish at 1.97 as the crowd stayed fearful.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) also stayed on a very bullish signal and still near a decade peak of fear at 42.7/29.4. As noted previously, such extreme levels of investor fear have typically presaged notable market rallies.
S&P 500 Valuation and Treasury Yields
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 slipped to $236.24 per share. As such, the S&P's forward P/E multiple is 16.6x and nearing the "rule of 20" ballpark fair value at 16.9x.
The S&P's forward earnings yield is 6.04%.
The 10-Year Treasury yield closed higher at 3.13%. We view support as 3.0% and new resistance at 3.51%.
Our Near-Term Market Outlook
Friday's robust gains on heavy volume were helpful from a technical view regarding near-term market prospects. With the crowd remining terrified, we believe further progress is possible. However, some near-term consolidation registering higher lows for the indexes would add to that outlook's credibility.