The SPX closed strongly higher on the week by +3% after the lows Monday held perfectly at the anchored VWAP from the August lows and lined up with the election gap fill level of support near 5780. RSI also confirmed the move higher as it breaks above a trendline while MACD sees a bullish crossover higher. SPX closed right near the 6000 key strike price into options expiration Friday after the strong week printed a bullish weekly candle and now entering a holiday shortened week that is seeing an expected move in the options market of just about +/- 85 points. The big feature of this weeks rally was a substantial VIX volatility crush that boosted stocks but a lot of that fuel has run its course so going into the latter half of January it will be important to see stocks continue to have breadth expand as it started to show the past week. The SPX has now seen the past 5 days with each day seeing over 68% of SPX stocks advancing, the first time that has been the case in history so clearly a bullish thrust in market breadth that was needed. Support now is seen at 5940 where the 8/21 EMA is nearing a positive cross and a continued move higher should see some resistance at 6050 and then the former highs near 6100. A stronger upside advance from here into the end of month could perhaps target the JPM collar strike up near 6165. With FOMC just about 10 days away and the start of earnings season heating up, it will be crucial to see SPX hold above the 5900 zone for now and then build support above 6000 for sustainability off these recent lows, while a VIX holding under 16 would also be a welcomed development.

Market Sentiment/Breadth

AAII sentiment for the week ending 1/15 showed bullish responses fell to 25.4% from 34.7% prior while bearish responses rose to 40.6% from 37.4%. Neutral sentiment rose to 34.0% from 28.0%. The bullish reading of 25.4% is the lowest since November 2023. The bull-bear spread (bullish minus bearish sentiment) decreased 12.4 percentage points to –15.1%. The bull-bear spread is unusually low and is below its historical average of 6.5% for the fifth time in eight weeks. The NAAIM Exposure index ticked up to 70.21 from 65.38 last week and is well below last quarter’s Q4 average of 85.81. Total equity fund flows for the week ending 1/8 had $-18.9 billion in outflows in equities. Friday’s close saw NYSE new highs at 96, while new lows of 12 and the 10-day MA of New High/Low Differential is negative at -40. The percentage of SPX stocks above their 50-MA is at 42.2% after getting under the 20% mark as a bottoming signal, while those above their 200-MA was 60.4%. NYSI Summation index crossed above its 8-MA for a short-term bullish signal. NYMO McClellan Oscillator closed at +58 and is into 5-month highs now nearing Overbought. The cumulative AD line is back above the 40 EMA short term breadth trend and closed above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA is at 0.55. CNN Fear and Greed index is in the Fear zone at 38 from 27 last week. The VIX/VXV ratio closed at 0.88. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.