As we begin a new trading week, let's assess the market's charts and indicators.
While all the major equity indexes closed at or near their session highs Friday, none were able to violate resistance levels or trend lines. This leaves the indexes in a mix of neutral and bearish trends.
We suspect that the new sideways trading ranges for the charts we discussed here will remain in force until violations of resistance can be achieved.
In or view, very selective buying is appropriate on individual names with healthy chart trends and at reasonable forward valuations.
Friday's Gains Leave Chart Trends Unchanged
Chart Source: Worden
On the charts, all the major equity indexes closed higher on Friday with positive NYSE and Nasdaq internals on lighter volume.
All closed near their session highs, but the near-term trends were unaffected with the Nasdaq Composite (see above) and Nasdaq 100 neutral and the rest remaining in near-term downtrends.
The new trading ranges noted on the charts and discussed last week remain intact and have yet to shift from their sideways projections.
Cumulative market breadth is also neutral for the All Exchange, NYSE and Nasdaq while no stochastic signals were generated at the session's close.
All combined, they imply some sideways movement for now.
Data Completely Neutral & Still Suggests Sideways Action
The data dashboard is almost entirely neutral, including all the 1-Day McClellan Overbought/Oversold Oscillators (All Exchange: -23.59 NYSE: -32.25 Nasdaq: -18.42).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) shifted back to neutral from bullish as it rose to 22%.
The Open Insider Buy/Sell Ratio did see a lift to 66.7 but stayed neutral as well.
The detrended Rydex Ratio (contrarian indicator) dipped to -0.40, staying neutral.
Last week's AAII Bear/Bull Ratio (contrarian indicator) is still encouraging, however, as it rose to 2.0 with the crowd becoming more fearful. Their extreme fear is a typically bullish signal for the markets in general.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) was neutral at 27.8/40.3.
S&P Valuation and Yields
The forward 12-month consensus earnings estimates from Bloomberg for the S&P 500 slipped to $220.59 per share. Thus, the valuation gap is still somewhat of an issue with the S&P's forward P/E multiple lifting to 18.0x while the "rule of 20" ballpark fair value remains at 16.6x.
The S&P's forward earnings yield is 5.56%.
The 10-Year Treasury yield closed lower at 3.38% and below support. It is now short-term bearish with new support at 3.19% and resistance at 3.55%, by our analysis.
Our Market Outlook
After the volatility surrounding the recent banking turmoil, we believe the charts and data are suggesting we are now in a period of some sideways action within more defined trading ranges until resistance levels can be overcome. We continue to believe some very selective buying can be done that are both technically and fundamentally attractive. They are not easily found via our reviews, but they do exist.
