They're finally in sync. The charts and data that is.
All the major equity indexes closed at or near their highs of the day Tuesday and are now neutral versus their prior negative trends. All are now on bullish stochastic crossover signals as well.
Meanwhile, the data remain generally neutral except for investor sentiment readings (contrarian indicators), which continue to sit on very bullish signals.
As such, while some consolidation of the recent sizable gains may be likely, we believe the charts and data are now in concert, suggesting buying weakness may now be done with a higher degree of confidence than was previously the case.
All Index Charts Close Above Resistance
Chart Source: Worden
On the charts, all the major equity indexes closed higher Tuesday with positive NYSE and Nasdaq internals on higher trading volume.
All closed at or near their intraday highs with every index closing above its respective near-term resistance level.
Also, the Nasdaq Composite (see above), Nasdaq 100 and Value Line Arithmetic Index closed above their near-term downtrend lines, turning neutral from bearish, and join the Russell 2000 in that regard.
Improvement was also seen on the cumulative advance/decline line for the NYSE shifting from negative to neutral. However, the All Exchange and Nasdaq A/Ds remain bearish at this time.
Positive action was also seen regarding stochastic levels as all registered bullish crossovers, following the move on the Dow Jones Transports during the previous session.
Data Still Find Sentiment on Very Bullish Signals
The data find the McClellan Overbought/Oversold Oscillators remaining neutral after Tuesday's rally (All Exchange: +35.3 NYSE: +38.13 Nasdaq: +32.46).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) rose to 20% and is still on a bullish signal.
The Open Insider Buy/Sell Ratio dropped to 97.4 as insiders pulled back from their increasing buying activity over the past several sessions.
Importantly, the detrended Rydex Ratio, (contrarian indicator), remains on a very bullish signal, although it rose to -3.06 from -3.50. It is still at a level that has only been exceeded five times in the past 10 years as the ETF traders continue their extended leveraged short exposure, and in our opinion, will continue to need to cover.
This week's AAII Bear/Bull Ratio (contrarian indicator) rose to 2.63 and is still on a very bullish signal as well, with bears outnumbering bulls by more than 2 to 1.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) is 34.3/25.4 and also bullish.
S&P Trading at a Slight Discount
The forward 12-month consensus earnings estimate from Bloomberg for the S&P 500 dipped to $233.69 per share. As such, its forward P/E multiple is 16.2x and at a slight discount to the "rule of 20" ballpark fair value of 16.4x.
The S&P's forward earnings yield is 6.16%.
The 10-Year Treasury yield closed lower at 3.62%. We view support as at 3.5% with resistance at 4.0%.
Our Near-Term Market Outlook
While some consolidation of the notable market gains over the past two days is likely, in our opinion, the charts and sentiment data are now suggesting to us that buying weakness may be done with a higher degree of confidence.