Technical Market View

The SPX rose another +1% for the week that featured a mostly upside grind bias in the indexes while single stocks continued to make outsized moves higher mostly. The action ended the week with a bit of a whimper as Friday closed slightly lower after reaching a fresh high at 6750 on the SPX, now halfway between 6500 and the elusive 7000 round number level which likely is a yearend target from here. The question into the first full week of October is whether markets get any kind of correction before the typically stronger November through December calendar months. Breadth has started to wane just a bit recently, but sector rotations are showing strength continue and the overall SPX index is staying resilient, riding its 21 EMA higher. That level now is up at 6623 and comes a key line in sand to watch for any potential deeper pullback. The 55-day EMA is further down at 6477 and may soon rise to the 6500 level which would make sense as a key support on any potential dips in October. Outside of that, the signs of froth and hype are abound with high beta stocks taking turns making wild surges and the increase of IPO’s hitting the market is also a slight concern but price action is truth until it changes and for now, it will bear watching the SPX 6650 level into next week with October options expiration already just two weeks away. October is known as a potentially volatile month but one that tends to usher in stronger November action so ideally, we get a dip to set that up.

Market Sentiment/Breadth

AAII sentiment for the week ending 10/1 showed bullish responses tick up at 42.9% from 41.7% prior while bearish responses were unchanged at 39.2% from 39.2%. Neutral sentiment fell to 17.9% from 19.1%. The bull-bear spread (bullish minus bearish sentiment) increased 1.2 percentage points to 3.8%. The bull-bear spread is below its historical average of 6.5% for the 33rd time in 35 weeks. The NAAIM Exposure index fell to 80.66 from 86.24 last week and is now just below last quarter’s Q3 average of 86.63, which is a historically higher average level. Total equity fund flows for the week ending 9/24 had $-20.6 billion in outflows in equities. The prior day’s close saw NYSE new highs at 162, while new lows at 13 and the 10-day MA of New High/Low Differential is still positive at +84. The percentage of SPX stocks above their 50-MA is 61.4% but still diverging from the summer high while those above 200-MA is at 67.4%. NYSI Summation index is still below its 8-MA showing a lack of breadth on this recent new leg higher for a short-term bearish signal. NYMO McClellan Oscillator closed at -4 and is back in a Neutral zone short term. The cumulative AD line is still 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 but still in a Neutral zone. CNN Fear and Greed index is in the Neutral zone at 54 from 53 last week. The VIX/VXV ratio closed at 0.873, near the lower bound. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.