Weekly Market View 10-29-23
The SPX closed lower for the week by -2.4% after an early week post OPEX rebound found resistance just before the 8 EMA and finally tested that one-year POC and VWAP into the 412 SPY zone. The chart below shows SPY instead of SPX to see the volume profile and how thick the long-term support is here at 410-415 and should be viewed as a zone rather than absolute price level. Breadth improved by Thursday with a sharp bullish divergence showing up but the market was weighed down by the weekend war risk factor. Still with VIX making lower highs through the week its setting up a potentially explosive short covering bounce into this week with FOMC on Wednesday the clear catalyst as the calendar shifts to November, and the seasonally stronger odds start to point to buyside. If the FOMC meeting, comes with little surprise then a likely big collapse in VIX and implied volatilities should provide structural buying flows from dealers closing hedges. Clearly the 410 level is a key long term buy spot but if prices sank the next level is the 50% retracement from 2022 lows coming at 403.77 but the risk reward is very favorable now heading into year end. If this general support creates a low then upside exists to 450 SPY by year end. First resistance comes in at 425 where the 21 EMA sits above.
AAII sentiment for the week ending 10/25 showed bullish responses decreased to 29.3% from 34.1% prior while bearish responses rose to 43.2% from 34.6%. Neutral sentiment fell to 27.5% from 31.3%. The bull-bear spread (bullish minus bearish sentiment) decreased 4.8 percentage points to –5.3%. The bull-bear spread remains below its historical average of 6.4% for the seventh time in eight weeks. The NAAIM Exposure index sharply decreased to 24.82 from 66.67 and well below last quarter’s average of 60.53. This is the lowest reading since the October 2022 lows and readings under 25 have been signs of major bottoms. Equity fund flows for the week ending 10/25 had $-16.15 billion of outflows in equities, the 6th straight week of outflows. Friday’s close saw NYSE new highs at 20 while new lows of 369 and the 10-day MA of New High/Low Differential is negative at -279. The percentage of SPX stocks above their 50-MA is 10.6% and often see major lows made under 10% level while those above their 200-MA was 24.6%. NYSI Summation index is below its 8-MA for a short term sell signal. NYMO McClellan Oscillator closed at -47 and getting closer to oversold. 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 0.78. CNN Fear and Greed index is in the Extreme Fear zone at 24 from 26 last week. The VIX/VXV ratio closed at 0.955, which measures the spread between 1- and 3-month implied volatility, above 1.0 exhibits fear and tends to mark a low.