The S&P 500 (SPX) continued its pullback last week, falling another 1.27% and closing below the 55-EMA for the first time since mid-October. Last week’s low will be a strong bull/bear gauge moving forward given the confluence of the key 4,500 level, the 50% retracement of the rally from the October low, and the top of November value. The pullback also aligns closely with other drawdowns during the 2021 run at 5.25% from the prior peak (others recently were 6.3%, 4.8%, 5.8%, and 5.5%). If we breach the prior lows, support below is at 4,448, 4,436, and then down around 4,360. Friday’s high is an important area to watch to the upside with the 8- and 21-EMA at 4611.50-4588. A breakout above moves back inside December value with upside to 4689.50. Both RSI and MACD are into oversold territory as well and could start to see signs of stabilization before turning and making a run at a sustained move back above 4,600.

Market Sentiment/Breadth

AAII sentiment for the week ending 12/1 showed a drop in bullish responses to 26.7% vs 33.8% prior while bearish sentiment jumped to 42.4% vs 35.7%. Neutral sentiment rose to 31% from 30.5%. Both bullish and bearish responses are near range extremes now, too. NAAIM Exposure fell to 87.87 from extreme highs recently but still very extended and not close to being overly bearish or near a potential buy signal.  Lipper Fund flows had $13B of inflows to equities last week, the biggest inflow in more than six weeks. Breadth remains very weak. Last week’s NYSE Net New Highs vs New Lows was -116, the first negative number since October 2020. Nasdaq weekly New Highs vs New Lows was -551, the weakest print since March 2020. Both NYSI and NASI remain firmly below their 8-EMA and in a sell signal. Cumulative AD fell for the fourth straight week and lowest levels since August. CBOE Equity P/C 50-day MA was 0.472 and starting to rise again after a period of complacency. VIX:VXV remains elevated at 0.96, a sign of fear. CNN Fear and Greed is at 20, ‘extreme fear’, and down from 33 last week. This is an extreme and area where we’ve seen a bounce twice before.