Technical Market View

The SPX closed strongly on Friday to end the first week of June, which gained +1.5% overall seeing broad-based strength from all sectors after the employment report relieved concerns and SPX pinned right at the key 6000 price point. This now marks 5 of the past 7 weeks higher for the SPX and having registered nearly a +9% return since the Zweig breadth thrust confirmed very strong market internals that ended April. The market now has two weeks until the large June triple witching OPEX, which also features a highly anticipated FOMC meeting and a holiday with Juneteenth being closed for trading. The VIX also hit the 16 handle on Friday as implied volatility this week was vaporized. The market is likely to have a lot of incentives to see dip buying persist into the upcoming options expiration week and as long as the 6000 mark is now supportive with positive gamma it should decrease daily ranges, which was evident multiple days this week. With the all-time highs just a few percent above current levels and tailwinds supporting bulls its likely to see some kind of a upside break to that 6150 high with potential to see a blowoff type move into OPEX. Support is key to hold at the 8 EMA near 5950 while the weekly chart also showing great strength confirming a 8/21 EMA bull cross and MACD bull cross on the weekly timeframe, only adding to the bulls case for new highs likely into summer. The final week of June and Q2 can often be weaker as profit taking shows up so it would be on watch for a turning point potentially.

Market Sentiment/Breadth

AAII sentiment for the week ending 6/4 showed bullish responses edged lower to 32.7% from 32.9% prior while bearish responses ticked down to 41.4% from 41.9%. Neutral sentiment rose to 25.9% from 25.2%. The bull-bear spread (bullish minus bearish sentiment) increased 0.2 percentage points to –8.8%. The bull-bear spread is below its historical average of 6.5% for the 18th time in 20 weeks. The NAAIM Exposure index fell to 81.62 from 88.41 last week and is just above last quarter’s average of 72.50. Total equity fund flows for the week ending 5/28 had $-10.3 billion in outflows in equities. The prior day’s close saw NYSE new highs at 83, while new lows at 12 and the 10-day MA of New High/Low Differential is positive at +47. The percentage of SPX stocks above their 50-MA is at 73.4% while those above 200-MA was 52.2%. NYSI Summation index on Friday crossed back above its 8-MA for a short-term bullish signal. NYMO McClellan Oscillator closed at +13 and now back to 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 0.59. CNN Fear and Greed index is in Greed zone at 63 from 61 last week. The VIX/VXV ratio closed at 0.838, 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.