Technical Market View

The SPX closed higher for the week by a solid +2% and finished the month of May up over +6.2% for the best single month since November 2023 and the best May in 35 years. This past 6 week rally shows how powerful markets can be when sentiment is all on one side of the boat and price action and volatility point the opposite direction and confirmed by market breadth. The SPX did hold the early week gap up news and while hitting its head on the big 6000 round number resistance level it did hold above the 8-day EMA all week on a closing basis even with the Friday morning dip that saw eventual buyers bring prices back above 5900. The action the past few weeks has now formed a bullish flag above that 5/12 gap up opening candle that also has sustained solid breadth numbers although short term the NYSI cross down signals potential stalling out at this 6000 level. The start of the month of June favors upside and a potential to push above that 6k mark going into a more bullish seasonal time ahead of June OPEX triple witching in less than 3 weeks now. After June 20^th market seasonality does turn a bit softer. Support is now seen at 5900 if prices hold above. The low Friday held just below 5850 and the 21 EMA now rising to 5800 so a secondary key support line in sand while any break below there would target a gap fill down to 5700. Upside resistance is stiff at 6000 as mentioned but a close above that would likely target 6100 as the value area high the past one year with all-time highs at 6147.

Market Sentiment/Breadth

AAII sentiment for the week ending 5/28 showed bullish responses fell to 32.9% from 37.7% prior while bearish responses rose to 41.9% from 36.7%. Neutral sentiment fell to 25.2% from 25.6%. The bull-bear spread (bullish minus bearish sentiment) decreased 10.0 percentage points to –9.0%. The bull-bear spread is below its historical average of 6.5% for the 21st time in 23 weeks. The NAAIM Exposure index rose to 88.41 from 80.87 last week and is back near 3 month highs and above last quarter’s Q4 average of 72.50. Total equity fund flows for the week ending 5/21 had $-13.5 billion in outflows in equities. The prior day’s close saw NYSE new highs at 57, while new lows at 40 and the 10-day MA of New High/Low Differential is positive at +34. The percentage of SPX stocks above their 50-MA is at 70.4% while those above 200-MA was 51.0%. NYSI Summation index is below its 8-MA for a short-term bearish signal. NYMO McClellan Oscillator closed at -13 and now back to Neutral zone short term. The cumulative AD line is above the 40 EMA short term breadth trend and above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA is at 0.59. CNN Fear and Greed index is in Greed zone at 62 from 64 last week. The VIX/VXV ratio closed at 0.869, under the 1.0 level of inversion. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.