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The SPX last week squeaked out a positive return though closed the week with an uninspiring fade. The resistance came right at upper value 7560 as the key level bulls need to close above but some positive developments last week as the 8-MA held above the 21-MA despite the convergence and avoided a bearish cross. AVWAP from July lows remains in focus as key support, a loss of 7660 likely leads to a volume pocket fill and retest back to 7590. Interestingly, the Friday high rejected exactly at the middle of the rising 5 month channel. A break above 7760 out of the multi-week consolidation flag can target 8000 or higher into year-end.
AAII sentiment for the week ending 8/26 showed bullish responses fall to 32.9% from 35.5% prior while bearish responses rose to 44.4% from 39.9%. Neutral sentiment fell to 22.6% from 24.6%. The bull-bear spread fell 7.1 percentage points to -11.5%. The bull-bear spread is below its historical average of 6.5% for the 19th time in 22 weeks. The NAAIM Exposure index is at 102.66, a two year high and above last quarter's average of 87.61. Total equity fund flows for the week ending 8/19 had -$23.55 billion in outflows in equities, widening from the -$20.89 billion the week prior, with domestic equity at -$20.79 billion and world equity at -$2.76 billion, while bond funds took in $6.89 billion against $5.17 billion. Bank of America's Bull and Bear Indicator rose to 9.7 from 9.5 holding deep in sell territory, with Michael Hartnett's team noting 82% of global equity indices are overbought against the 88% that triggers its breadth rule sell signal. Friday's close saw NYSE new highs fall to 54 while new lows fell to 51, against 71 highs and 79 lows a week ago. The percentage of SPX stocks above their 50-MA fell to 52.9% from 57.5% while those above the 200-MA fell to 68.9% from 69.3%, with the Bullish Percent Index at 55.24 from 57.39. NYSI Summation index fell to 179.49 from 226.05 and NYMO McClellan Oscillator closed at -18.47 from -10.69 and stays negative for a second week. CBOE Equity P/C printed 0.62 in Friday's single session with the total put/call at 0.84. CNN Fear and Greed index is in the Neutral zone at 54.43 from 54.51 last week. SKEW closed at 149.77 from 143.90 and keeps firming as VIX fell to 14.43 from 15.13 and 9-day vol dropped to 11.22 from 12.58. The VIX/VXV ratio closed at 0.826 from 0.818. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.
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Goldman Sachs (GS) shares of the investment banking giant are stabilizing after retesting the 200 EMA and large support near one year point of control on the volume profile at 775 and seeing a MACD bullish cross triggering into the new week. GS has room to rebound if markets choose to bounce back and a move back to 850-875 would fill in space on the volume profile. GS saw recent dip buyers of 300 January $925 calls at $85.25 and 300 Dec 2028 $900 calls bought on 3/12 while June 2027 $1300 calls now have over 1100x in open interest from buyers on 2/27.
Trade to Consider: Long GS May $850/$875 Call Spreads at $10 debit
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Set-Ups
Alkermes (ALKS) on 6/22 with a large buy of 2500 November $55 OTM calls for $750K and has also seen 1500 August $55/$45 bull risk reversals open and 3500 August $45 calls bought on 6/15 remain in open interest.
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Stocks opened quietly into a small gap up after the CPI report rose by +0.9% but markets shrugged it off due to it likely being a temporary oil price based jump. Stocks sold off into midday to test near 6800 but stabilized overall even with VIX turning green. Software stocks continued to get pummeled which is still a looming concern while Oil stays sticky near $100. It is worth noting that the S&P 500 moved into negative territory following a New York Post interview with President Trump in which he said the U.S. military is preparing to resume strikes on Iran if peace talks fail this weekend. Overall, the market is holding up as solid semiconductor strength helps offset weakness in cyclicals and defensives.
What’s On Tap: PPI Highlights a Quieter Econ Data Week, UK GDP, Aussie Employment Change; Earnings From GS, BLK, C, WFC, JPM, BAC, MS, JNJ, NFLX, AA, TSM as reporting season begins already with banks to start
Flow
Recap/
Highlights
The past week saw early week action saw quieter volumes as traders waited for Iran clarity which then brought on a busy midweek with the ceasefire news. In that surge higher by Wednesday we saw opening call selling and overwriting into this rally which is normal and makes sense after a big move, funds would rather sell calls to cap upside rather than sell their stock. We saw a lot of industrial names the past few days rolling calls to May from April as a continued theme for months. We saw stubborn software put sellers rolling out in time in names like NOW, DDOG, SNOW.
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