Weekly Market View 2-4-24
The SPX closed higher for the week by +1.4% after being lower midweek but nearly that amount but reversing back to fresh all-time highs after blowout Tech earnings, albeit coming on Friday with weak breadth overall and not a very convincing number of sectors participating in the move higher. The SPX magnet of 5000 is playing a huge part of this most recently move up as it now is just about 1% shy of that psychological round number level. The concern is that market internals are not supportive of a market that would likely get above and stay above that 5000 target so should breadth continue to weaken then the rally could be running on fumes as the next monthly February OPEX approaches in just two weeks now. Seasonality also shifts to the weaker side after mid-month and the expiration passes with the week of Presidents Day often being a softer one that can give a turning point in Q1. For now, price continues to close above its rising 21 EMA which is a good spot to reduce risk on a close below 4840 SPX or roughly 482 in the SPY close below that shows a volume pocket below that down towards 475. RSI is also showing a lower high developing on this recent thrust higher in prices so a potential negative divergence worth watching and VIX also is making higher lows the past month.
AAII sentiment for the week ending 1/31 showed bullish responses increased sharply to 49.1% from 39.3% prior while bearish responses decreased to 24.5% from 26.1%. Neutral sentiment fell to 26.4% from 34.6%. The bull-bear spread (bullish minus bearish sentiment) increased 11.4 percentage points to 24.5%. The bull-bear spread is above its historical average of 6.5% for the 13th consecutive week. The NAAIM Exposure index increased to 87.36 from 84.13 last week and above last quarter’s average of 67.81. Total equity fund flows for the week ending 1/24 had $-7.5 billion of outflows in equities. Friday’s close saw NYSE new highs at 172 while new lows of 49 and the 10-day MA of New High/Low Differential is still positive at +131. The percentage of SPX stocks above their 50-MA declined to 66.4% while those above their 200-MA was 72.2%. NYSI Summation index crossed back above its 8-MA for a short term buy signal but not with much power. NYMO McClellan Oscillator closed at -11 and Neutral. The cumulative AD line increased this week and 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 0.68. CNN Fear and Greed index is in the Greed zone at 67 from 77 last week. The VIX/VXV ratio closed at 0.887. This measures the spread between 1- and 3-month implied volatility, above 1.0 exhibits fear and tends to mark a low.