The SPX closed higher on the week by nearly +1%, continuing a strong streak of upside advances since the mid-September reversal day that showed clear breadth thrusts supporting new highs on deck. October OPEX now has passed and while the election is still a few weeks ahead, the markets are focused on corporate earnings which have so far come in quite strongly from the financial and airline sectors. The week after monthly expiration tends to see a potential pullback so if that comes then first support is seen at the rising 8-day EMA near 5820 and then 5800 while larger support is at the 21 EMA near 5760 currently and a moving average that has held prices since the rally started in early September. SPX has done a good job of one time framing higher so far in October, which simply means each days low is unable to break or even test the prior days’ low, often a sign of anxious buyers willing to buy any dip. If the upside grind continues then the next targets come in at 5900 with the elusive 6000 round number becoming closer into the picture now even before the election quite possibly. With sentiment yet to reach euphoric levels and breadth holding up fairly well, it continues to pay to focus on the long side of the market as even now the VIX starting to fade lower could give an added boost of fuel to buyside momentum. If the market were to start showing more narrow breadth and lack of broad-based sector participation then that would become a red flag after the election perhaps but one week at a time.

Market Sentiment/Breadth

AAII sentiment for the week ending 10/16 showed bullish responses fall to 45.5% from 49.0% prior while bearish responses rose to 25.4% from 20.6%. Neutral sentiment fell to 29.2% from 30.4%. The bull-bear spread (bullish minus bearish sentiment) decreased 8.4 percentage points to 20.1%. The bull-bear spread is above its historical average of 6.5% for the 23rd time in 24 weeks. The NAAIM Exposure index fell to 81.68 from 90.26 last week and now back at last quarter’s average of 80.82 without that fervor you would expect at new market highs. Total equity fund flows for the week ending 10/9 had $-10.4 billion in outflows in equities. Friday’s close saw NYSE new highs at 221, while new lows of 17 and the 10-day MA of New High/Low Differential is positive at +176. The percentage of SPX stocks above their 50-MA is at 77.2% while those above their 200-MA was 79.6%. NYSI Summation index is already crossing higher above its 8-MA for a short-term bullish signal. NYMO McClellan Oscillator closed at +4 and Neutral. The cumulative AD line is near new highs and is above the 40 EMA short term breadth trend and above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.60. CNN Fear and Greed index is in the Greed zone at 75 from 74 last week. The VIX/VXV ratio closed at 0.94 and maybe partly skewed due to election IV in play. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.