The SPX closed higher by about +1% for the week after hitting a high of 4607 and then pulling back sharply on Thursday in one of the larger selloffs seen this summer before bouncing back Friday after finding buyers at the 8 EMA yet again which now sits at 4550. Even with the rebound to close the week the market froth is starting to show itself and jump in volatility Thursday was a reminder that news driven downside can occur but sellers need to see follow through below the 8 EMA for a few days to show potential trend shift and ultimately a close under the 21 day EMA would be more meaningful, a support level currently at roughly 4500 SPX and should be a crucial line in sand going forward. Any close below that likely ushers in a test of the 4440-gap fill zone with 4400 a large support area. MACD and RSI are starting to show some bear divergence so momentum is waning but also can just result in sideways consolidation between 4500-4600 as the market navigates earnings season into early August. Upside resistance is at 4600 and then 4625-30.

Market Sentiment/Breadth

AAII sentiment for the week ending 7/26 showed bullish responses fall to 44.9% from 51.4% prior while bearish responses rose to 24.1% from 21.5%. Neutral sentiment rose to 31.0% from 27.1%. The bull-bear spread (bullish minus bearish sentiment) plunged 9.1 percentage points to 20.8%. The bull-bear spread reached an unusually high-level last week and remains above average for the eighth consecutive week. The NAAIM Exposure index increased to 101.82 from 99.05, the highest level since November 2021 and is well above last quarter’s average of 70.22. Lipper fund flows for the week ending 7/26 had $3.2B of inflows in equities, 4 of the last 5 weeks seeing inflows. Friday’s close saw NYSE new highs at 119 while new lows of 12 and the 10-day MA of New High/Low Differential is positive at +118. The percentage of SPX stocks above their 50-MA is 81.2% while those above their 200-MA was 73.0%. NYSI Summation index is above 8-EMA and in a short term buy signal. NYMO McClellan Oscillator closed at +11 and still in a Neutral zone. The cumulative AD line is strong and making fresh recent 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 at 0.56. CNN Fear and Greed index is in Extreme Greed zone at 78 from 82 last week. VIX/VXV ratio is 0.837, which measures the spread between 1- and 3-month implied volatility, and under 0.80 shows market complacency while above 1.0 is panic and fear.