The SPX closed the week unchanged after a Friday rally tagged new highs at 5523 before quarter end profit taking pushed prices back down under 5500 and to the 8-day MA near 5460. A sharp reversal but typical to see at the end of a month/quarter that has been so strong with funds locking in gains on the books after Q2 was up +4% on the SPX with the Nasdaq closer to +9% on the quarter. The SPX starts July with a clear uptrend in place with low volatility persisting as the dispersion trade of this market continues to see single stocks make larger directional moves while the indexes see a grind up of sorts that shrinks realized volatility. Sector rotation is a feature of a strong bull market and that will need to be seen more in July as breadth is still concentrated on mega cap Tech but as rate cuts become more a reality on the horizon this could propel other groups such as Consumer Discretionary (AMZN, TSLA, etc.) while other growth sectors like Software and Biotech are starting to exhibit that bullish rotation recently as well. The SPX is up 33% since the October lows and now the first few weeks of July tend to see bullish flows with new quarter money entering so the picture is not bearish. The target above is 5638 which is the 1.618 Fibonacci extension that become the new level of interest after the April pullback concluded so if we can see a rally into that this month it may be a solid zone to decrease a lot of risk and play it more safer the rest of summer with a sideways consolidation more likely by late July and August as seasonals then turn weaker but for now price action is solid. Support is below at 5410 near the 21 EMA and then the 55 EMA comes in at 5300 which should be strong support on any dips this month. The options expected move for this week is less than 60 points with the market open just 3.5 days but the jobs report on Friday is a key catalyst.

Market Sentiment/Breadth

AAII sentiment for the week ending 6/26 showed bullish responses at 44.5% from 44.4% prior while bearish responses rose to 28.3% from 22.5%. Neutral sentiment fell to 27.2% from 33.1%. The bull-bear spread (bullish minus bearish sentiment) decreased 5.7 percentage points to 16.1%. The bull-bear spread is above its historical average of 6.5% for the eighth consecutive week. The NAAIM Exposure index was unchanged to 85.44 from 85.26 last week and is near last quarter’s average of 84.57. Total equity fund flows for the week ending 6/18 had $-11.5 billion of outflows in equities. Friday’s close saw NYSE new highs at 135 while new lows of 43 and the 10-day MA of New High/Low Differential is falling further at +13. The percentage of SPX stocks above their 50-MA is at 48.8% and back above the 50 level but still sluggish while those above their 200-MA was 69.6%. NYSI Summation index is trying to curl higher but still below its 8-MA for a short term sell signal. NYMO McClellan Oscillator closed at +4 and back near Neutral. The cumulative AD line is trying to bounce at 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 0.64. CNN Fear and Greed index is in the Fear zone at 44 from 41 last week. The VIX/VXV ratio closed at 0.857. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.