Technical Market View

The SPX closed slightly lower for the week by -0.4% and only due to the Friday selloff on Mideast news which was initially bought overnight from key support but closing near 5975 and under the 6000 key level into the weekend as traders had little incentive to jump in ahead of weekend risk. Overall, the week prior to expiration got the minor dip we expected and now heading into a large June triple witching OPEX week markets have the potential to rebound back over 6000 which could act as a pinning level as well. The options expected move priced in this week is near +/- 130 points so a wide range implied which can see an upside advance to 6100 if FOMC on Wednesday is more dovish. The holiday shortened week with Thursday being closed also can see a drift higher with an extra day of option theta making it tough for the VIX to sustain above 20 perhaps. A weaker move would see first support at the 5900 level which is near the JPM collar strike of 5905 that may start to become more in play as a magnet into quarter end if markets pull in further. The 21 EMA has not been pierced since late April when prices got back above it and now will be another key support level to watch currently at 5925. With breadth metrics still on buy signals the overall bias into expiration week favors some upside but that could set up a sell the rally event after FOMC this week if it were to transpire as late June can be weaker.

Market Sentiment/Breadth

AAII sentiment for the week ending 6/11 showed bullish responses tick higher to 36.7% from 32.7% prior while bearish responses fell to 33.6% from 41.4%. Neutral sentiment rose to 29.7% from 25.9%. The bull-bear spread (bullish minus bearish sentiment) increased 11.8 percentage points to 3.1%. The bull-bear spread is below its historical average of 6.5% for the 19th time in 21 weeks. The NAAIM Exposure index ticked up to 82.66 from 81.62 last week, staying unchanged but above last quarter’s average of 72.50. Total equity fund flows for the week ending 6/4 had $-21.2 billion in outflows in equities. The prior day’s close saw NYSE new highs at 44, while new lows at 60 and the 10-day MA of New High/Low Differential is positive at +46. The percentage of SPX stocks above their 50-MA is at 72.2% while those above 200-MA was 49.8%. NYSI Summation index on Friday crossed back above its 8-MA for a short-term bullish signal. NYMO McClellan Oscillator closed at -16 and in the Neutral zone short term. The cumulative AD line is near fresh highs 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 0.58 in a Neutral zone. CNN Fear and Greed index is in Greed zone at 60 from 63 last week. The VIX/VXV ratio closed at 0.92, 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.