A Sideways Ride on Wall Street
Let's check the charts and technicals to see where the market is heading.
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Buckle up and get ready for the market to ... drive sideways in the very near term.
Before you take that spin around Wall Street, however, let's check under the hood, as two more index charts shift into neutral.
First, the major equity indexes closed mixed Tuesday with negative New York Stock Exchange and Nasdaq internals. Trading volumes declined on both from the prior session. The charts saw two of the indexes downshift from bullish to neutral, leaving their trends a mix of neutral and bullish projections, while cumulative market breadth remains bullish.
The data finds the McClellan one-day overbought/oversold oscillators that were overbought and suggesting some digestion, have returned to neutral, lessening their caution signal. (All Exchange: 33.8; NYSE: 43.52; Nasdaq: 28.32).
The detrended Rydex Ratio, however, a contrarian indicator, remains on a bearish signal. It slipped to 1.13.
The forward valuation of the S&P 500 based on Bloomberg’s forward 12-month earnings estimates, meanwhile, remains very extended above ballpark fair value. Valuation, you won't be surprised to see, remains a concern. The 12-month consensus earnings estimate for the S&P from Bloomberg is still unchanged at $250.77.
That leaves its forward price-to-earning of 22.4 still well above the “rule of 20" ballpark fair value at 16.2. Earnings yield is unchanged at 4.46%.
The Charts
On the charts, the S&P 500, Dow Jones industrial average, Nasdaq composite and the Nasdaq 100 posted gains yesterday as the rest saw losses. The percent of S&P issues trading above their 50-day moving averages, a contrarian indicator, dipped 76% and is also neutral.
They closed in a mix of near their intraday highs and midpoints with negative internals on lighter trading volumes.
On the plus side, the Dow made a new closing high, while the Dow Transports and mid-caps closed below their near-term uptrend lines and are now neutral vs. their prior bullish trends.
Only the S&P, Dow and Russell 2000 are now in uptrends. The rest? They're neutral.
Yet cumulative market breadth is still bullish for the All Exchange, NYSE and Nasdaq.
Stochastic levels remain overbought on all, but show no bearish crossover signals.
The Technicals
This week’s American Association of Individual Investors Bear/Bull Ratio, a contrarian indicator, is unchanged at 0.73, staying neutral.
The Investors Intelligence Bear/Bull Ratio, also a contrary indicator, rose to 36.24 from 30.89% with investment advisers a bit less bullish, shifting its signal to mildly bearish from bearish.
The Open Insider Buy/Sell Ratio declined to 27.6% and is neutral.
Buck and Treasuries
The 10-year Treasury yield moved higher to 3.83%. Support is 3.70% and resistance at 3.94%. Its near-term trend is bearish.
The dollar, via the U.S. Dollar Index Bullish Fund UUP, closed lower at $27.93. Its trend is bearish with support at $27.93 and resistance at $28.23.
The Bottom Line
So, the weight of the evidence is projecting some sideways movement over the very near-term. We remain buyers of individual names that are trading near volume-support levels and at discounts to their one-year projected growth rates and good fundamentals.