Thursday's market close saw a number of negative technical events on the charts. Most of the major equity indexes closed near the midpoint of the session with two key exceptions. However, their near-term trends are still a mix on neutral and bullish implications.
Meanwhile, the data have become a bit more encouraging, suggesting some possible lessening of downside pressure, while the contrarian sentiment data have intensified their bullish signal.
As such, we are not ready to throw in the towel in our speculation that weakness should be bought when nearing support.
Index Trends Remain a Mix of Neutral & Bullish
Chart Source: Worden
On the charts, the major equity indexes closed mostly lower Thursday with negative internals on the NYSE and Nasdaq as trading volumes declined from the prior session.
The Nasdaq Composite (see above) and Nasdaq 100 closed near their lows of the day as the rest closed near their midpoints.
The session's weakness did result in some negative technical events with the S&P 500, Nasdaq Composite and Nasdaq 100 closing below support.
The DJIA closed below its near-term uptrend line as did the Value Line Arithmetic Index, turning their trends to neutral from bullish.
The one outlier was the Dow Jones Transports posting a gain.
So, the trends are now positive for the Dow Transports, MidCap 400 and Russell 2000 with the rest neutral.
Cumulative market breadth was unchanged and neutral for the All Exchange, NYSE and Nasdaq.
The stochastics saw bearish crossovers on the DJIA, Midcap 400 and Value Line Arithmetic Index. We would note, however, the Nasdaq indexes are now oversold.
McClellan Oscillators All Neutral With Bullish Sentiment Data
The McClellan Overbought/Oversold Oscillators that were sending cautionary signals a few days ago are now all neutral and, in our view, should ease some of the recent downward pressure (All Exchange: +12.91 NYSE: +44.62 Nasdaq: +25.01).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) dipped slightly to 48%, staying neutral.
The Open Insider Buy/Sell Ratio slipped to 36.0, also staying neutral.
The detrended Rydex Ratio, (contrarian indicator) deepened to -1.96 as leveraged short-sellers remain very leveraged short, continuing its bullish signal.
This week's AAII Bear/Bull Ratio (contrarian indicator) dipped to 2.27 but also remains on a very bullish signal as does this week's Investors Intelligence Bear/Bull Ratio (contrary indicator) at 38.5/36.9, as bears dropped and bulls rose but remains on its bullish signal.
S&P 500 Valuation and Yields
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 dipped again $227.25 per share. As such, the S&P's forward P/E multiple is 16.4x and at a lower premium to the "rule of 20" ballpark fair value of 15.9x.
The S&P's forward earnings yield is 6.11%.
The 10-Year Treasury yield closed higher at 4.12%. We continue to view support as 3.85% with resistance at 4.43%.
Our Near-Term Market Outlook
Thursday's weak action put a few more dents on the charts. Yet, as the charts remain mixed in neutral and bullish trends with lighter OB/OS levels, buying weakness near support is still appropriate.