The SPX closed higher for the week by +1.4% to register the first closing week above the 5000 level ever. The momentum in Tech being a driving factor continues to lift the index to new highs as earnings season winds down and the continued chase for outperformance from funds who missed the early part of this rally since November now seem to be desperate buyers of any shallow dip. This coupled with the cash on the sidelines the past year that was content with 5% risk free returns is now thirsty for extra yield as the Nasdaq nears 10% year to date returns in just mid-February. This is setting up a potentially dicey scenario heading into the Spring months as breadth wanes further the past week and less broad participation from other sectors. The positive this week was the relative strength starting to show in the IWM Russell small caps which could take the baton to new highs if the Nasdaq falters soon. For now, February options expiration is here and tends to hold a bullish bias through the years so with the SPX above 5000 that is now a first support while 5050 is a next upside options gamma resistance. A close back under 5000 would see a test of the 8 EMA at 4970 while an open gap sits below there at 4955. Volatility likely remains subdued until there is a break below 4900 which is key support in the medium term. RSI continues to show negative divergence as a warning, but momentum can stay higher until it doesn’t so an optimal approach would be to prudently take profits into Feb OPEX week.

Market Sentiment/Breadth

AAII sentiment for the week ending 2/7 showed bullish responses unchanged to 49.0% from 49.1% prior while bearish responses decreased to 22.6% from 24.5%. Neutral sentiment rose to 28.4% from 26.4%. The bull-bear spread (bullish minus bearish sentiment) increased 1.9 percentage points to 26.5%. The bull-bear spread is at an unusually high level and is above its historical average of 6.5% for the 14th consecutive week. The NAAIM Exposure index increased to 93.77 from 87.36 last week and above last quarter’s average of 67.81. Total equity fund flows for the week ending 1/31 had $-13.5 billion of outflows in equities. Friday’s close saw NYSE new highs at 188 while new lows of 20 and the 10-day MA of New High/Low Differential is still positive at +119. The percentage of SPX stocks above their 50-MA declined to 63.0% while those above their 200-MA was 70.8%. NYSI Summation index crossed back below its 8-MA for a short term sell signal. NYMO McClellan Oscillator closed at +7 and Neutral. The cumulative AD line increased this week and is above the 40 EMA short term breadth and above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.66. CNN Fear and Greed index is in the Extreme Greed zone at 78 from 67 last week. The VIX/VXV ratio closed at 0.857. This measures the spread between 1- and 3-month implied volatility, above 1.0 exhibits fear and tends to mark a low.