The charts three major equity indexes closed back below their near-term downtrend lines Wednesday. This leaves all the charts in near-term bearish trends. Cumulative market breadth remains generally negative as well.
And while the 1-day McClellan OB/OS Oscillators remain oversold but unable to fuel any notable strength thus far, corporate insiders continue to increase their selling activity while forward 12-month consensus earnings estimates for the S&P 500 continue to erode.
We continue to scan the horizon for evidence that the recent market correction has been completed but have yet to see such signs.
All Index Chart Trends Are Near-Term Bearish
Chart Source: Worden
On the charts, the major equity indexes closed mixed Wednesday with negative internals on lighter volume. Half posted minor gains as the other half declined.
Technical events of import appeared on the S&P 500 (see above), Nasdaq Composite and Nasdaq 100 as they closed back below their near-term downtrend lines leaving all the charts short-term bearish.
Market cumulative breadth remains generally negative as well with the All Exchange and Nasdaq bearish and the NYSE neutral.
No stochastic signals were generated.
Insiders Continue Selling
On the data dashboard, the 1-Day McClellan Overbought/Oversold Oscillators are still oversold but have yet to be able to result in what is usually seen in the form of a bounce (All Exchange: -61.4 NYSE: -70.74 Nasdaq: -56.3).
The percentage of S&P 500 issues trading above their 50-day moving averages (contrarian indicator) dropped to 40% but remains neutral.
The Open Insider Buy/Sell Ratio declined as well to 20.1. It remains cautionary as insiders, who have been very active sellers, have yet to show any important sign of buying interest.
The detrended Rydex Ratio (contrarian indicator) is declined to -0.09 and is neutral.
This week's AAII Bear/Bull Ratio (contrarian indicator) dropped to 0.99 as bearish sentiment increased but remains neutral.
The Investors Intelligence Bear/Bull Ratio (contrary indicator) is neutral at 59.9.
Forward S&P 500 Estimates Drop Again
Valuation remains problematic.
The forward 12-month consensus earnings estimates from Bloomberg for the S&P 500 continued to slip, to $219.69 per share. It continues to be a problem as its P/E multiple of 18.0x remains at a significant premium to the "rule of 20" ballpark fair value of 16.0x. Said valuation, in our opinion, continues to leave little margin for error for equities.
The S&P's forward earnings yield is 5.56%.
The 10-Year Treasury yield closed higher at 3.99%. It is in a short-term uptrend with support at 3.76% and resistance at 4.01%, by our analysis.
Our Market Outlook
While the OB/OS continue to suggest a bounce, there are still too many clouds overhanging the market, as noted above, to imply the recent correction has been completed. We remain patient and cautious for the near term for equities until such evidence appears.