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The SPX had a mixed week but overall finishing slightly lower even with the Friday rebound rally closing strong right back at the 200 day MA near 3975. There may have been some OPEX flows pushing prices higher Friday so the start of this week should be interesting to see if can see price close back over the 200 MA and make a higher high above the trendline from the highs which could be a pivotal trend shift longer term and point to a stronger rally up to the 50% retrace at 4155 and even maybe the 61.8% fib retrace up at 4311. But earnings season is here and that brings a wildcard factor along with the coming next FOMC meeting on 2/1 likely being a big inflection date for momentum. The MACD and RSI are still in bull mode and breadth continues to impress and suggest bulls are in control. Support is seen at 3915 below and then 3875 while a drop below that likely retests 3800. Closing January above 3840 would ensure a positive month to start 2023 and that is looked at as a key barometer for the year ahead.
Market Sentiment/Breadth
AAII sentiment for the week ending 1/18 showed bullish responses rise to 31.0% from 24.0% prior while bearish responses fell to 33.1% from 39.9%. Neutral sentiment was unchanged at 36.0% from 36.0%. Optimism among individual investors about the short-term direction of the stock market rose to its highest level in nine weeks. Neutral sentiment remained the same, while pessimism fell to its lowest level in 11 weeks. NAAIM Exposure index increased to 65.07 from 45.31 and is now above last quarters average of 51.03. Lipper fund flows for the week ending 1/18 had $4.1B of outflows in equities. Friday’s close saw NYSE new highs at 47 while new lows of 16 and the 10-day MA of New High/Low Differential is positive at +73. The percentage of SPX stocks above their 50-MA is 62.8% while those above their 200-MA was 62.2%. NYSI and NASI Summation indexes are above the 8-MA for a short-term bullish signal. NYMO McClellan Oscillator closed at +56 and is now back near the neutral zone. Cumulative AD line had a strong surge above the 40 EMA and above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.89 and at new highs based primarily on put arb trades skewing the data. CNN Fear and Greed index is in Greed zone at 59 from 64 last week.
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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
CoStar (CSGP) a name that recently tested some trend support and filled a key gap and looks to be basing the last two weeks. Although shares are triggering a bearish 21/55 crossover, a move back above $79 could regain momentum and take aim back at the highs.
Market
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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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