All the charts of the major equity indexes are in near-term bullish trends -- and that should be respected.
However, the data are mixed and not really making any strong implications as to very near-term action. Meanwhile, while the market's forward valuation is still at a respectable premium to "ballpark" fair value.
As such, our song remains the same. Respect the trends while waiting for weakness as a buying opportunity.
Indexes Hold Gains from Wednesday's Surge
Chart Source: Worden
On the charts, the major equity indexes closed mixed Thursday with mostly positive internals as trading volumes dropped from the prior session.
All closed around the midpoint of their intraday ranges with the Nasdaq Composite (see above), Nasdaq 100 and Value Line Arithmetic Index posting gains as the rest gave up small portions of Wednesday's significant gains.
So, we still find all the index charts in near-term uptrends and above their 50-day moving averages while cumulative market breadth is positive and above the 50 DMA for the All Exchange, NYSE and Nasdaq as well.
No stochastic signals were generated.
Data Dashboard Looks Mixed
Two of the McClellan Overbought/Oversold Oscillators remain in overbought territory with the Nasdaq staying neutral (All Exchange: +54.88 NYSE: +73.7 Nasdaq: +43.04).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) remains in bearish territory at 91% and near its highest readings for the past two years.
Interestingly, the Open Insider Buy/Sell Ratio rose to 58.8, staying neutral. While only neutral, it reveals that insiders have been gradually increasing their buying activity as the markets have risen.
In contrast, the detrended Rydex Ratio, (contrarian indicator) dipped to -0.59. While also staying neutral, the leveraged ETF traders have been doing some minor shorting on strength as insiders have been doing the opposite.
This week's AAII Bear/Bull Ratio (contrarian indicator) rose to 1.46, remaining bullish versus its very bullish signal prior to the rally.
Also, the Investors Intelligence Bear/Bull Ratio (contrary indicator) at 30.5/41.7 remains neutral with bulls now outnumbering bears.
S&P's Forward 12-Month Earnings Estimates Lift
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 rose to $225.78 per share from $224.68. As such, its forward P/E multiple stands at 18.1x while remaining at a sizable premium to the "rule of 20" ballpark fair value of 16.5x.
The S&P's forward earnings yield rose to 5.54%.
Also of import was the 10-Year Treasury yield closing lower at 3.53% and below support. We believe new support is 3.45% with resistance at 3.8%.
Our Near-Term Outlook
Nothing on the charts or market breadth is casting a shadow on the near-term positive index trends. However, the data are relatively ambiguous regarding very near-term action while valuation is stretched. Thus, we remain of the opinion that trends should be respected while buying weakness.
