The SPX closed higher for the week by +1.7% and held near highs above 5400 after the midweek gap up on CPI data. Despite weakening breadth and narrow leadership the Nasdaq continues to propel things as Tech names had another banner week but now entering a potential key triple witching options expiration week it could be a turning point to watch for as quarter end approaches and a lack of earnings on the docket likely makes the market succumb to more macro and geopolitical headlines that may lead to a more meaningful pullback into early summer. By definition, new all-time highs are never bearish long term as the trend is firmly in place but the chance for a summer swoon or rotation of sectors is possible as the calendar turns to July. Remembering back to last summer the market was in a similar situation coming off a strong June making new 52-week highs, but the June OPEX week marked a short term high on 6/15/23 and led to a modest -3% dip over the following two weeks. This could be setting up again but if you are longer term focused beyond a month then pullbacks to the 55-day MA, for example currently at SPY 522, can be looked at as opportunity when they arise. Overall, an index needs more than half of its components to contribute to sustainable uptrends and right now that is slipping the past week seeing just 43% of SPX stocks above their 50-day moving average. As for this week June OPEX holds a large amount of positive gamma in expiring options, almost exclusively on the call side with many ITM calls in open interest. This creates natural support on dips as dealers have stock to buy into pullbacks and stock to sell into new highs, resulting in compressed volatility. The closer expiration gets the more likely markets can see an ’unpinning’ of that compressed volatility and likely a more violent selloff. Based on that alone is why we tend to see the week after June expiration be one of the weakest weeks of the quarter seasonally. SPX has support at 5375 to fill last week’s gap and then the 21 EMA at 5325 while larger support on a steeper pullback into quarter end may target 5250. Early this week could see a rally higher that would likely top out at 5500 as a max ceiling based on open interest.

Market Sentiment/Breadth

AAII sentiment for the week ending 6/12 showed bullish responses rise to 44.6% from 39.0% prior while bearish responses fell to 25.7% from 32.0%. Neutral sentiment up ticked to 29.7% from 29.0%. The bull-bear spread (bullish minus bearish sentiment) increased 11.9 percentage points to 18.9%. The bull-bear spread is above its historical average of 6.5% for the sixth consecutive week. The NAAIM Exposure index increased to 86.30 from 68.65 last week and is near last quarter’s average of 84.57. Total equity fund flows for the week ending 6/5 had $-9 billion of outflows in equities. Friday’s close saw NYSE new highs at 39 while new lows of 93 and the 10-day MA of New High/Low Differential is still positive but weakening at +30. The percentage of SPX stocks above their 50-MA is at 43.6% so showing that narrow leadership recently while those above their 200-MA was 67.0%. NYSI Summation index is below its 8-MA for a short term sell signal. NYMO McClellan Oscillator closed at -50 and getting closer to Oversold. The cumulative AD line is now slipping under the 40 EMA short term breadth trend but still above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.65. CNN Fear and Greed index is in the Fear zone at 39 from 45 last week. The VIX/VXV ratio closed at 0.853. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.