The SPX closed higher for the week by +1.7% although it did not feel like it with volatile two sided trading persisting into the monthly options expiration on Friday but the overnight low holding strong above the key 55 EMA and anchored VWAP from August and closing back over the 21 EMA just barely near 6660. The whole week trading inside the range of Fridays large candle and therefore printed an inside week candle. That now can be valuable as a signal to see which direction prices break from but based on the large VIX collapse Friday showing much less concern going into next week it vouches for potential upside to continue with many traders likely expecting bearish action. A break above 6700 and closing over that would increase confidence in volatility subsiding and potentially starting a new leg higher into the rest of year that still would point to a target at 6950 as the 1.618 fib extension level. Markets also now await earnings season which has been a reason for optimism in the past quarter so any incremental positive seen in Tech earnings reports can lift markets back up from here as well as the CPI report being the first government economic data set to be released this week. Overall key support remains at 6550 and then 6500 while a close below that would increase odds of a bigger downside move unfolding towards 6350- or one-year value area high currently.

Market Sentiment/Breadth

AAII sentiment for the week ending 10/15 showed bullish responses fell to 33.7% from 45.9% prior while bearish responses jumped to 46.1% from 35.6%. Neutral sentiment rose to 20.3% from 18.5%. The bull-bear spread (bullish minus bearish sentiment) decreased 22.6 percentage points to –12.4%. The bull-bear spread is unusually low and is below its historical average of 6.5% for the 34th time in 37 weeks. The NAAIM Exposure index was unchanged at 84.87 from 87.57 last week and is still near last quarter’s Q3 average of 86.63, which is a historically higher average level. Total equity fund flows for the week ending 10/8 had $-25.5 billion in outflows in equities. The prior day’s close saw NYSE new highs at 30, while new lows at 52 and the 10-day MA of New High/Low Differential is still positive at +52 but declining. The percentage of SPX stocks above their 50-MA is at 45.6% while those above 200-MA is at 60.8%. NYSI Summation index is still below its 8-MA showing yellow flags recently for a short-term bearish signal. NYMO McClellan Oscillator closed at -21 and is back near Neutral zone short term. The cumulative AD line rebounded to close right at the 40 EMA short term breadth trend and is still above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA is at 0.57 but still in a Neutral zone. CNN Fear and Greed index is in the Fear zone at 27 from 29 last week. The VIX/VXV ratio closed at 0.941 after spiking above 1.0 this week for a potential short-term turning point. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.