The SPX closed -5% for the week and much of that drop was in the last few hours of Thursday and into Friday’s big CPI report miss. The tight range between 4075 and 4175 broke to the downside ahead of next week’s busy schedule of the FOMC meeting on Wednesday along with VIX expiration and then Friday’s large quad witching options expiration. The 4100 level of support was a key spot that needed to hold in the short term but the market quickly moved to 4000 and lower once selling gave way. With the SPX now back under the 8/21 EMA’s it warrants caution as MACD also is nearing a bear cross into a catalyst heavy week with the market focused on interest rates. Potential to see a double bottom retest of the May lows and RSI bull divergence would be a positive occurrence but if cannot hold the lows then 3725 becomes in play as a longer-term level. On strength higher the open gap formed at 4020 becomes a first zone of resistance.

Market Sentiment/Breadth

AAII sentiment for the week ending 6/8 showed bullish responses drop to 21% from 32% prior while bearish responses rose to 46.9% from 37.1%. Neutral sentiment rose to 32.1% from 30.9%.  The drop puts optimism back at an unusually low level. It also keeps bullish sentiment below its historical average of 38.0% for the 29th consecutive week. NAAIM Exposure jumped higher to 50 but remains bearish to neutral. Lipper fund flows for the week ending 6/8 had $15M of inflows to equities. Friday’s close saw NYSE new highs at just 4 while new lows of 251, bearish breadth to end the week. The percentage of SPX stocks above their 50-MA is 12.2% while those above their 200-MA was 25.6% and a new low for this year. NYSI and NASI Summation index both started to curl down Friday but still above the 8-MA. NYMO dropped sharply to -39.9 to end the week but not quite in oversold territory. Cumulative AD remaining in a downtrend below the 40 EMA short term and 89 EMA long term. CBOE Equity P/C 50-day MA at 0.65 and at two-year highs. CNN Fear and Greed stayed in Fear zone at 28 from 27 last week.