Weekly Market View 12-17-23
The SPX closed at +2.5% for the week with many other sectors surpassing these returns including the small cap Russell index gaining as much as +7% in just the final 3 days of the week. The SPX saw a fervor of upside volume on the new high Thursday which also happened to exit the upper edge of the trend channel in place the past year, so clearly a bit exhaustive on the upside at this point right into the Dec OPEX time. This can likely lead to a small consolidation or pullback to the 8 EMA early this week at 4660, but seasonal factors and flows are very supportive so any minor dip ahead of the Christmas holiday weekend should be contained to the rising 21 EMA near 4575-4600 as a likely max floor into yearend barring unexpected events. Also, a key consideration at this point is the SPX being less than 100 points away in proximity to its all-time high at 4818 which may easily become a magnet target level by Jan 1st. This is a very strong market being driven by ‘fear of missing out’ and the crushing of implied volatility that leads to buyside flows and can continue into the typically lowest volume weeks of the year that are absent of many events or data. Thus dips have higher odds of being shallower and any larger volatility waiting for January.
AAII sentiment for the week ending 12/13 showed bullish responses increased slightly to 51.3% from 47.3% prior while bearish responses decreased to 19.3% from 27.4%. Neutral sentiment rose to 29.4% from 25.3%. Optimism is now unusually high, at its highest level since July 20, 2023 (51.4%). The bull-bear spread (bullish minus bearish sentiment) increased 12.1 percentage points to 32.0%. The bull-bear spread is above its historical average of 6.5% for the sixth time in 14 weeks. The NAAIM Exposure index increased slightly to 77.97 from 76.09 and is above last quarter’s average of 60.53 but still not overly extreme where July levels hit 100. Total equity fund flows for the week ending 12/6 had $-16.4 billion of outflows in equities. Friday’s close saw NYSE new highs at 196 while new lows of 13 and the 10-day MA of New High/Low Differential is positive at +134. The percentage of SPX stocks above their 50-MA is 87.6% while those above their 200-MA was 75.0%. NYSI Summation index is above its 8-MA for a short term buy signal. NYMO McClellan Oscillator closed at +39 and now Neutral. The cumulative AD line is above the 40 EMA short term breadth and firmly above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.72. CNN Fear and Greed index is in the Greed zone at 67 from 68 last week. The VIX/VXV ratio closed at 0.812. This measures the spread between 1- and 3-month implied volatility, above 1.0 exhibits fear and tends to mark a low.