The SPX closed slightly lower on the week but overall a choppy rangebound few days following options expiration as noted last week was likely to see some volatility expand. Strong dip buyers were present midweek as the SPX tested the 21 day EMA near 5775 and rallied back up to 5860 with solid earnings in key names launching the Nasdaq higher as a leading group and Tech stocks overall holding firm ahead of their reports coming this week. The final few days of October coming up should still see two sided action with the late Friday pullback also seeing VIX stay near 20, indicating roughly a 1.25% daily range priced into the SPX while this weeks expected move for 5 days is about 105 points. Momentum is fading a bit at the recent highs with MACD crossing lower so likely in a holding pattern ahead of the election or at least will need to see Tech earnings and the monthly payrolls report this week impress the markets in order to clear this range that has been forming between 5775-5875. A close below the 21 day near 5775 would point to a lower move towards the 55 day MA currently at 5680. SPX has churned precisely at this big 1.272% fib extension level of 5819 that we had pointed out as a target the past two months. A close above 5875 would confirm further strength to new highs that can target 6000 but that may have to wait for the first week of November to unfold with positive seasonality being a tailwind and the likely post-election implied volatility crush being a boost for stocks once it unwinds but definitely some potential to see a retest lower first if the 21-day moving average were to break short term.

Market Sentiment/Breadth

AAII sentiment for the week ending 10/23 showed bullish responses fell sharply to 37.7% from 45.5% prior while bearish responses rose to 29.9% from 25.4%. Neutral sentiment rose to 32.4% from 29.2%. The bull-bear spread (bullish minus bearish sentiment) decreased 12.3 percentage points to 7.8%. The bull-bear spread is above its historical average of 6.5% for the 24th time in 25 weeks. The NAAIM Exposure index fell to 79.13 from 81.68 last week and is just under 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 10/16 had $-12.9 billion in outflows in equities. Friday’s close saw NYSE new highs at 105, while new lows of 23 and the 10-day MA of New High/Low Differential is positive at +154. The percentage of SPX stocks above their 50-MA is at 57.2% while those above their 200-MA was 72.2%. NYSI Summation index is back below its 8-MA for a short-term bearish signal. NYMO McClellan Oscillator closed at -59 and quickly is near oversold. The cumulative AD line pulled back off highs but 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 is at 0.59 and new lows for this year. CNN Fear and Greed index is in the Greed zone at 59 from 75 last week. The VIX/VXV ratio closed at 0.97 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.