As we approach a three-day weekend, let's assess the market's dashboard.
All the major equity indexes closed near their highs of the day Wednesday, with two closing above their near-term downtrend lines (see below) and now neutral versus their prior bearish projections.
The data are generally neutral, but extreme levels of investor fear, that are contrarian indicators, are near decade highs that have been coincident with market lows, which we continue to find encouraging.
So, while Wednesday offered some improvement, was it enough to move the needle?
On the Charts
All the major equity indexes closed higher Wednesday with positive internals on lower volume for the NYSE and Nasdaq.
All closed near their intraday highs that found both the S&P 500 (see above) and DJIA closing above their near-term downtrend lines that are now near-term neutral versus their prior negative implications. Also, the DJIA closed above near-term resistance.
Yet the rest of the indexes remain in near-term downtrends that should be respected until proven otherwise.
Cumulative breadth improved on the Nasdaq, returning to neutral, as are the A/Ds for the All Exchange and NYSE.
No stochastic signals were generated.
Positive Sentiment Data Near Peak Fear Levels
The McClellan 1-Day Overbought/Oversold oscillators are mildly overbought for the All Exchange (+52.67), overbought on the NYSE (72.42) and neutral on the Nasdaq (+39.48).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) rose to 23% but remains bullish.
The Open Insider Buy/Sell Ratio rose to 96.6, staying neutral.
However, the detrended Rydex Ratio (contrarian indicator) remains very bullish at -2.60 as the ETF traders remain leveraged short at historically high levels. As such, the Rydex/Insider dynamic remains encouraging.
This week's AAII Bear/Bull Ratio (contrarian indicator) remains very bullish 1.97, dropping from 2.39.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) also remains very bullish signal and at a decade peak of fear at 43.0/27.8. Only twice in the past decade has bearish sentiment been this extreme, both of which were coincident with market bottoms.
The Investors Intelligence Survey is 43.0/27.8 (very bullish)
Here's Something We Haven't Seen for a While
The forward 12-month consensus earnings estimate from Bloomberg for the S&P has lifted to $235.60 per share. As such, the S&P's forward P/E multiple remains at 16.9x and at a discount to the "rule of 20" finding ballpark fair value at 17.2x. Said discount has not been seen in the markets for several months.
The S&P's forward earnings yield is 5.92%.
The 10-Year Treasury yield closed lower at 2.75%. We view support as 2.75% and resistance at 3.2%.
Is It Time to Put Money to Work?
Wednesday's chart action saw some encouraging signals appear. However, more technical improvements are necessary to become more optimistic for the short term. Yet, we believe investor sentiment and valuation suggest medium-to long-term investors may want to start putting some money to work.