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The SPX was weak after the CPI report Tuesday and retested the 3900 support into options expiration but slipped below Friday before forming a bullish hammer candle just below the lows of the month. A potential short term oversold bounce can retrace above 3900 now up to at least the 8 EMA at 3950 and on follow through the 21 EMA comes in near the key 4000 round number resistance level. The SPX clearly is struggling to sustain more than a bounce since the August highs but also a small bullish divergence formed on RSI as shown below on the recent low and with FOMC day this week it could create a setup for a short covering rally that has been common with these post options expiration weeks. A slide lower however would quickly point to the open gap filling near 3800 from July.
Market Sentiment/Breadth
AAII sentiment for the week ending 9/14 showed bullish responses rise to 26.1% from 18.1% prior while bearish responses fell to 46.0% from 53.3%. Neutral sentiment fell to 27.9% from 28.7%. The results show a large reversal from last week. Pessimism dropped while optimism jumped. Despite recent increases, optimism remains below its historical average of 38.0% for the 43rd consecutive week. NAAIM Exposure index increased to 33.86 from 27.33 and still below last quarters average of 41.75. Lipper fund flows for the week ending 9/14 had $12.7B of outflows in equities, the third straight week of at least $10B of outflows. Friday’s close saw NYSE new highs at 13 while new lows of 362 and the 10-day MA of New High/Low Differential at -63. The percentage of SPX stocks above their 50-MA is 26% while those above their 200-MA was 27.6%. NYSI and NASI Summation index both bearish below 8-MA. NYMO McClellan Oscillator closed at -51 and is back to near short term oversold. Cumulative AD line flipped lower and back under the 40 EMA and 89 EMA long term signal. CBOE Equity P/C 50-day MA at 0.65 and still quite high. CNN Fear and Greed index in Fear zone at 36 from 44 last week.
Open
Interest
Alerts
Fidelity Info (FIS) shares with an early breakout move Thursday of a flag with the 200-MA overhead a potential target, FIS has 7000 October $100 calls bought in open interest with 5000 of the $110 calls short. We discussed FIS in-depth on 6/1, noting FIS spoke at a BAML Conference in March outlining why the market is undervaluing shares with its premier assets and 70% of revenue is generated from software and services to clients with deep, long-term and recurring relationships while the other 30% is generated via consumer spending. Forecasts see revenues growing at a 7% CAGR and EPS 10-15% annually the next three years. FIS cited strong wins last quarter in Banking and Capital Markets and plans to raise buybacks to $6B in 2023 though also likely to be active in M&A to defend/gain market share and increase exposure to faster growing segments.
Chart
Set-Ups
Costco (COST) shares flagging in a narrow August range this month and respecting the top of monthly value area support at 540 as they closed above today and look ready to run to 558 which is an overhead VPOC that is untested from back in April when the stock made fresh all-time highs. COST has rebounded strong since the May low it made and is likely to move retail earnings reports this week. A close below 21 EMA near 530 is a good stop level.
Market
Talk
The SPX had a choppy weak overall starting lower but reversing off a key support near 3900 on Thursday. Morning strength Friday faded midday ahead of the long weekend. Overall the 4000 SPX resistance held tough this week and still remains a gamma line that needs to be reclaimed for less volatility and more dealer supported hedging flows. Staying under that key level would be a sign of caution until September OPEX in two weeks when a lot of put positions likely will expire and provide a potential rebound similar to June when options expiration marked a key turning point. September seasonality tends to be weaker to start but the quad witch options expiration week has historically been quite bullish and the week after OPEX has been more bearish. Those stats primarily in bull markets however have the potential to be the opposite in a downtrending market. Breadth got weaker the past week but overall the NYMO oscillator showed extreme oversold conditions which favors a rebound in the short term. VIX faded midweek off the highs but rebounded off the 22 handle Friday as the markets still remain jittery below that 4000 SPX level. The last week ahead of Labor Day is often a choppier dull market with low liquidity so it will be interesting to see how next week transpires as it’s a shorter week and likely more funds come back into the market. Overall the SPX holding the 3900 is needed as that is a cluster of fibonacci support and a trendline from the lows.
The sector leaders for the week were Biotech -1.3%, Insurance -2%, Utilities -1%. Laggards included Metals and Mining -8%, Semi’s -6.6%, Solar -5.5%.
The week ahead is quieter but still sees August PMIs, China Trade, ISM Services, and ECB Decision and Press Conference. Earnings from KR, NIO, ZS, UI, DOCU, PATH, BILI, GTLB, GME, COUP.
Flow
Recap/
Highlights
Options flows for the week saw put buyers active in auto names F and LCID while Sept put buys in refiners MPC, VLO. Bulls were active in EL, GM, SLB and also trucking names R, ODFL, LSTR. Later in the week saw call buys in large cap Tech AAPL, TXN while put buyers were out in consumer credit names like AFRM, AXP, ALLY. Lower delta opening put sales were seen in March for Tech names CRM, ANET, ORCL.
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