While the bulk of the charts of the major equity indexes remain bullish, the data is now sending some mixed signals. Meanwhile, market breadth continues to show signs of improvement.
Now, let's take a close look at the charts and data.
On the Charts
The bulk of the indexes closed lower Friday with negative internals on the NYSE and Nasdaq although trading volumes were rather light on a comparative basis.
Only the Nasdaq Composite (see above) and Nasdaq 100 posted gains as both managed to establish new closing highs. No shifts in trend or violations of support were registered, leaving all in near-term uptrends except for the Dow Jones Transports and MidCap 400 remaining neutral.
Cumulative market breadth saw further improvement with the All Exchange, NYSE and Nasdaq cumulative advance/decline lines remaining bullish while the Nasdaq closed above its 50-day moving average, joining the All Exchange and NYSE in that regard.
While some of the stochastic levels are overbought. No bearish crossover signals were generated.
The data saw a few shifts.
The McClellan 1-Day Overbought/Oversold Oscillators find the Nasdaq 1-day staying overbought with the NYSE and All Exchange neutral (All Exchange: +47.41 NYSE: +33.37 Nasdaq: +56.86).
The Rydex Ratio (contrarian indicator), measuring the action of the leveraged ETF traders lifted slightly to 1.34 and still finds the ETF traders heavily leveraged long and in bearish territory.
The Open Insider Buy/Sell Ratio dropped notably to 23.1 and is now bearish versus its prior neutral level.
Last week's contrarian AAII bear/bull ratio saw an increase in bears and bulls, remaining neutral (32.77/35.43) with the Investors Intelligence Bear/Bull Ratio at a bearish 18.5/50.0 (contrary indicator page 9) as a few advisors left the bull camp.
Valuation and Yields
The forward 12-month consensus earnings estimate for the S&P 500 from Bloomberg was unchanged at $207.60 per share. As such, the S&P's forward P/E multiple is 21.8x with the "rule of 20" finding fair value at approximately 18.7x.
The S&P's forward earnings yield is 4.58%.
The 10-Year Treasury yield rose to 1.32% but remains within its current trading range with resistance at 1.4% and support at 1.23%. We reiterate the recent shift of the 10-Year yield into a higher trading range could cause some issues for the markets.
In conclusion, at this stage, we have yet to see enough of a shift in the weight of the evidence to warrant a change in our current "neutral/positive" near-term macro-equity outlook.