The SPX closed higher for the week by +1.2% at 4840 and all coming in the final two days of the week after the early pullback held support at the 21-day EMA of 4725. All time highs are never bearish, so this is a strong signal for the continuation of this bull market extending higher and likely eventually seeing that 5000 round number target as a magnet. However, this week’s strength and move higher was driven a lot in part by a massive January Leap option expiration that had a lot of positive gamma condition in place. That fuel is now gone and used up so as a result the current rally will need to be driven by market breadth expanding and strengthening. Something that has not occurred the past week or two with the majority of upside being based on the narrow leadership of the ‘Mag7’ mega cap stocks and Semiconductors. A fantastic rally to be sure but if it will be an ongoing one then most sectors and stocks need to participate. The SPX has support at the 8 EMA now at 4780 and has stayed above the rising 21 day since clearing above it in early November. The potential window of weakness seasonally opens more into mid to late February so if prices can sustain above that 21-day EMA, currently at 4743 then the upside can possibly go into January month end. Any sharper selling would likely target the volume pocket of space in the volume profile down to 4600. Also notable is the RSI negative divergence still developing as the SPX makes new highs, the RSI has not.

Market Sentiment/Breadth

AAII sentiment for the week ending 1/17 showed bullish responses decreased to 40.4% from 48.6% prior while bearish responses increased to 26.8% from 24.2%. Neutral sentiment rose to 32.9% from 27.2%. The bull-bear spread (bullish minus bearish sentiment) decreased 10.8 percentage points to 13.6%. The bull-bear spread is above its historical average of 6.5% for the 11th consecutive week. The NAAIM Exposure index decreased to 53.54 from 80.18 last week and back below last quarter’s average of 67.81. Total equity fund flows for the week ending 1/10 had $-10.5 billion of outflows in equities. Friday’s close saw NYSE new highs at 118 while new lows of 48 and the 10-day MA of New High/Low Differential is still positive at +28. The percentage of SPX stocks above their 50-MA is 75.4% while those above their 200-MA was 70.8%. NYSI Summation index is below its 8-MA for a short term sell signal. NYMO McClellan Oscillator closed at -37 and Neutral after bouncing this week from oversold near -70. The cumulative AD line pulled back but is above the 40 EMA short term breadth and firmly above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.71. CNN Fear and Greed index is in the Greed zone at 72 from 71 last week. The VIX/VXV ratio closed at 0.872. This measures the spread between 1- and 3-month implied volatility, above 1.0 exhibits fear and tends to mark a low.