Technical Market View

The SPX closed a strong week higher by +3.5% and after Mondays bullish reversal day we saw volatility get squashed with the VIX back to a 16 handle and further confirming the more bullish positive gamma environment as SPX made new all time highs by Friday hitting 6187. Breadth also expanded higher with more 52 week highs and overall participation from groups like Technology and Financials showing a broad-based advance. Markets now enter a bullish seasonal timeframe into early July and the real risk continues to be a fear of missing out type of melt up higher as potential odds for a July rate cut gets participants enthused. The first support on a pullback comes in at the 8 EMA currently at 6075 while larger macro support will now be at 6000 as a key line in sand likely for risk on through the early summer. To the upside we have Fibonacci extensions now in play as targets with the SPX closing above prior highs and from a weekly chart perspective the 1.272 fib extension is up at 6504, just 5% from current levels and may be a solid target for Q3 if the trend persists. A bigger picture target would be the 1.618 fib extension at 6958 and would be about a +12.5% rally from here, perhaps a year end objective if all goes well through the second half of year with AI fueling a chase for returns.

Market Sentiment/Breadth

AAII sentiment for the week ending 6/25 showed bullish responses tick up to 35.1% from 33.2% prior while bearish responses fell to 40.3% from 41.4%. Neutral sentiment fell to 24.7% from 25.4%. The bull-bear spread (bullish minus bearish sentiment) increased 3.0 percentage points to –5.2%. The bull-bear spread is below its historical average of 6.5% for the 21st time in 23 weeks. The NAAIM Exposure index fell to 81.41 from 94.09 last week, pulling back from recent highs but still above last quarter’s average of 72.50. Total equity fund flows for the week ending 6/17 had $-12 billion in outflows in equities. The prior day’s close saw NYSE new highs at 125, a 4 month high while new lows at 19 and the 10-day MA of New High/Low Differential is positive at +34. The percentage of SPX stocks above their 50-MA rose to 73.0% while those above 200-MA was 55.2%. NYSI Summation index crossed back above its 8-MA for a short-term bullish signal. NYMO McClellan Oscillator closed at +22 and still in the Neutral zone short term. The cumulative AD line is making freshly new 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 0.56 and falling but still in a Neutral zone. CNN Fear and Greed index is in the Greed zone at 65 from 55 last week. The VIX/VXV ratio closed at 0.839, with 0.80 often a lower extreme. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.