Technical Market View

The SPX closed higher for the week by near +1% but largely most of the gains coming on the early week strength which gapped higher Monday and held firm helped by the Mag7 mega caps and solid earnings reports from the likes of AMZN and GOOGL. Overall SPX ended October with a sixth straight month of gains which is a good sign for bulls into November as that scenario has produced strong returns into the month of November with average gains during the month of +5%. The post FOMC selloff late in the week tested the 8 EMA support thus far and Friday saw a rally end of day with a lot of choppy action into month end. Prices have held up well even with some breadth metrics declining but now that October is behind markets it allows for a fresh start into one of the stronger months in the calendar so there is potential this week to see that breadth improve and if VIX can decline from current levels it would point to the 7000 target being achieves on the SPX index. Support below here is at 6800 as a key level and then 6750 a larger retest of the former high.

Market Sentiment/Breadth

AAII sentiment for the week ending 10/29 showed bullish responses rise to 44.0% from 36.9% prior while bearish responses fell to 36.9% from 42.7%. Neutral sentiment fell to 19.1% from 20.5%. The bull-bear spread (bullish minus bearish sentiment) increased 13.0 percentage points to 7.2%. The bull-bear spread is above its historical average of 6.5% for the fourth time in 39 weeks. The NAAIM Exposure index rose to 100.83 from 90.35 last week now hitting a new high for the year and is back above last quarter’s Q3 average of 86.63, which is a historically higher average level. Total equity fund flows for the week ending 10/22 had $-19.5 billion in outflows in equities. The prior day’s close saw NYSE new highs at 64, while new lows at 95 and the 10-day MA of New High/Low Differential is still positive at +46. The percentage of SPX stocks above their 50-MA is at 41% while those above 200-MA is at 56%. NYSI Summation index is showing mixed signals with the recent cross higher now reversing back to a lower cross below its 8-MA for a short-term bearish signal. NYMO McClellan Oscillator closed at -17 and is just below Neutral zone short term. The cumulative AD line pulled back to test the 40 EMA short term breadth trend and is still above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA is at 0.55 but still in a Neutral zone. CNN Fear and Greed index is in the Fear zone at 35 from 33 last week. The VIX/VXV ratio closed at 0.851. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.