The SPX closed higher for the week by +0.5% even with the selloff on Friday to give back gains and sentiment extremely pessimistic due to world events and falling bonds. The market continues to carve out a bottom from the recent late September lows and prices may try to put in a higher low early this week as the 4325 level is retested thus far with the 4300 support below here as crucial to hold. The SPX hit a high of 4385 this week into its highs which found short term resistance at the 55 day EMA. Quite a steep advance from just the prior Friday when the bullish engulfing candle closed back over the 8 EMA. With sentiment so poor and seasonality more positive as we enter earnings season it does warrant an open mind to see if markets can discount what is known already and grind higher back to retest the 4450 thick volume area of resistance where it spent a lot of time in August and September. Above that would possibly target 4500, the midpoint of the bull market up channel. Support is at 4300 and then 4225 if weakness persists.

Market Sentiment/Breadth

AAII sentiment for the week ending 10/11 showed bullish responses increased to 40.0% from 30.1% prior while bearish responses fell to 36.5% from 41.6%. Neutral sentiment fell to 23.5% from 28.3%. The bull-bear spread (bullish minus bearish sentiment) skyrocketed 15.0 percentage points to 3.5%. Even with the jump, the bull-bear spread remains below its historical average of 6.5% for the fifth time in six weeks. The NAAIM Exposure index increased to 45.80 from 36.21 but is still under last quarter’s average of 60.53. Equity fund flows for the week ending 10/11 had $-8.29B of outflows in equities. Friday’s close saw NYSE new highs at 27 while new lows of 162 and the 10-day MA of New High/Low Differential is negative at -100. The percentage of SPX stocks above their 50-MA is 26.2% while those above their 200-MA was 39.4%. NYSI Summation index crossed slightly above its 8-MA but in a choppy pattern that needs follow thru for a short term sell signal. NYMO McClellan Oscillator closed at -6 and Neutral. The cumulative AD line is below the 40 EMA short term breadth and below the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.79. CNN Fear and Greed index is in the Fear zone at 29 from 25 last week. The VIX/VXV ratio closed at 0.939, which measures the spread between 1- and 3-month implied volatility, above 1.0 exhibits fear and tends to mark a low.