Uptrends that exist on each of the equity index charts are intact. And while valuation is troubling, the cautionary data of last week has diminished.
Let's take a closer look.
On the Charts
The indices closed mixed Friday with negative NYSE internals while the Nasdaq's were positive. Both saw an elevation in the level of trading volume.
The net result was the S&P 500, Nasdaq Composite and Nasdaq 100 closing higher on the day as the rest posted losses.
The only technical event of importance was the Nasdaq Composite closing above near-term resistance (see below).
Short-term uptrends remain intact on all the charts as are the cumulative advance/decline lines for the All Exchange, NYSE and Nasdaq.
Source: Worden
Once again, stochastic levels remain overbought but have not yet triggered bearish crossover signals.
Data
The data is generally neutral.
The one-day McClellan Overbought/Oversold moderated a bit, leaving only the NYSE still in overbought territory with the All Exchange and Nasdaq neutral (All Exchange: +49.46 NYSE: +70.83 Nasdaq: +30.97). As such, their cautionary tone of last week has lessened somewhat.
The Open Insider Buy/Sell Ratio remains neutral at 37.2 as is the detrended Rydex Ratio (contrary indicator) at +0.6, although insiders have been backing off on their buying as the leveraged ETF traders increased their leveraged long exposure.
Last week's AAII Bear/Bull Ratio (contrary indicators) at 49.4/25.33 found the "crowd" remaining quite skeptical of the markets despite the dramatic market gains from the March lows.
The cautionary signal coming from the counterintuitive percentage of S&P 500 issues trading above their 50-day moving averages remains bearish at 94.8%.
Valuation
Valuation is still an issue with the S&P 500 trading at a P/E of 23.6x consensus forward 12-month earnings estimates from Bloomberg of $128.89 per share as the "rule of 20" finds fair value at a 19.4x multiple, suggesting the index remains notably overvalued.
The S&P 500's forward earnings yield is 4.23% with the 10-year Treasury at 0.65%.
Our Outlook
While valuation is troubling, the cautionary data of last week has diminished. Thus, we are maintaining our near-term "neutral/positive" outlook for the major equity indices.
At the time of publication, Ortmann had no positions in any securities mentioned.