The SPX saw a strong end to the week which featured monthly options expiration and a close near highs for the week, a change from the past month where each Friday has been down. The 3636 June low was respected well on a retest and now price with its first official close above the 21 EMA since early September. This week will be crucial to see if the 8/21 EMA bull cross can trigger and follow through above 3800 possibly as the next key level with the 50% retracement above that at 3908. If this market extends higher then the 61.8% fib retrace comes in at the convenient 4000 round number zone. MACD and RSI are in bull mode so looking for upside here if last Friday’s low of 3650 holds. The SPX is now about 7.5% above the 3500 low that saw a massive bull engulfing candle reverse higher with a tone change.

Market Sentiment/Breadth

AAII sentiment for the week ending 10/19 showed bullish responses rise to 22.6% from 20.4% prior while bearish responses were rose to 56.2% from 55.9%. Neutral sentiment fell to 21.2% from 22.7%. Optimism is below its historical average of 38.0% for the 48th consecutive week. It is also unusually low for the eighth consecutive week and the 31st time in 42 weeks. The breakpoint between typical and unusually low readings is currently 27.6%. NAAIM Exposure index decreased to 43.28 from 19.84 and slightly back above last quarters average of 40.63. Lipper fund flows for the week ending 10/19 had $4.1B of inflows in equities, the first week of inflows in 2 months. Friday’s close saw NYSE new highs at 40 while new lows of 548 and the 10-day MA of New High/Low Differential is still negative at -383. The percentage of SPX stocks above their 50-MA is 28.8% while those above their 200-MA was 22.6%. NYSI and NASI Summation index have crossed positive above 8-MA for an official bullish signal. NYMO McClellan Oscillator closed at 22 and is neutral now. Cumulative AD line is still under the 40 EMA and 89 EMA long term signal in bear mode. CBOE Equity P/C 50-day MA at 0.70 and at new highs. CNN Fear and Greed index in Neutral zone at 45 from 21 last week.