Two of the major equity indices managed to shift their near-term trends to positive from neutral Thursday, leaving only one in a near-term downtrend at this point.
Cumulative breadth improved on the NYSE while the McClellan OB/OS Oscillators stayed in neutral territory, while recent improvement in investor psychology remains largely intact.
On the Charts
All the major equity indices posted gains Thursday with positive market internals on the NYSE and Nasdaq.
Of note, the MidCap 400 (see above) and Value Line Arithmetic Index both closed above resistance and their 50-day moving averages, thus turning their near-term trends to positive from neutral. They join the Nasdaq Composite and Nasdaq 100 in that regard.
The S&P 500, DJIA and Russell 2000 remain neutral with only the Dow Jones Transports still in a near-term downtrend.
Market breadth saw some improvement with the cumulative advance/decline line for the NYSE turning positive and above its 50 DMA.
The All Exchange and Nasdaq A/Ds remain neutral. No stochastic signals were generated.
The data still finds all the McClellan 1-Day Overbought/Oversold oscillators in neutral territory despite the gains (All Exchange: +7.66 NYSE: +16.3 Nasdaq: +1.21).
The Rydex Ratio (contrarian indicator), measuring the action of the leveraged ETF traders, remains bearish but dipping to 1.26.
This week's contrarian AAII bear/bull ratio (27.3/35.67) and Investors Intelligence Bear/Bull Ratio at 16.7/53.1(contrary indicator) improved, both seeing a drop in bulls and rise in in bears as the crowd became more fearful.
The Open Insider Buy/Sell Ratio at 49.3, while dipping slightly, still finds insiders more willing to participate on the buy side, which is a notable improvement, in our opinion, versus their absence over the past several weeks.
Market Valuation and Yields
The forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg lifted to $203.33 per share. As such, the S&P's forward P/E multiple is 21.7x with the "rule of 20" finding fair value at approximately 18.7x.
The S&P's forward earnings yield is 4.6%.
The 10-year Treasury yield closed at 1.27%. We view support to be 1.13% and resistance at 1.3%.
Despite declines Friday morning, the charts and data continue to suggest we maintain our current "neutral/positive" macro-outlook for equities.