The SPX closed slightly higher for the week that was mostly described as choppy yet volatile with Thursdays outside reversal down being one of the largest range candles of the year and showing clear failure at that 21 EMA stiff resistance for now. The market snapped back Friday after flushing sharply to new lows after Powell’s speech and with the VIX getting sold as event premium came out of the options market, it allowed for a short covering rally into the weekend right back to the all-important 8 EMA and 55-day EMA converging near 4410. On a continued bounce the 4450 level and 4470 zone is likely to be a tough zone to clear as long as breadth stays softer. Any break below the 4355 low from last week would see selling speed up and target the 4300 round number below while a steeper drop into the volume pocket below that would see eyes on the 4200 level which is a big confluence of support with it being near the 50% retracement of the rally from March and the lower end of the uptrend channel in place this year.

Market Sentiment/Breadth

AAII sentiment for the week ending 8/23 showed bullish responses fall to 32.3% from 35.9% prior while bearish responses rose to 35.9% from 30.1%. Neutral sentiment fell to 31.8% from 34.0%. Bearish sentiment is above average for the first time in 12 weeks. The bull-bear spread (bullish minus bearish sentiment) decreased 9.4 percentage points to –3.7%. This is the second consecutive week that the bull-bear spread is below its historical average of 6.5%. The NAAIM Exposure index decreased for the 4^th week straight to 34.36 from 59.87 and is under last quarter’s average of 70.22 and now actually registering new lows for 2023. Lipper fund flows for the week ending 8/23 had $-11.2B of outflows in equities, with 4 of the last 5 weeks seeing outflows. Friday’s close saw NYSE new highs at 25 while new lows of 66 and the 10-day MA of New High/Low Differential is negative now at -45. The percentage of SPX stocks above their 50-MA is 34.2% while those above their 200-MA was 52.0%. NYSI Summation index is below its 8-MA and in a short term sell signal. NYMO McClellan Oscillator closed at -39 after the snapback bounce and now back near Neutral. The cumulative AD line is below the 40 EMA short term breadth trend confirming the current downtrend, and now cracking below the 89 EMA long term bull signal showing this correction might have more to go. CBOE Equity P/C 50-day MA at 0.62. CNN Fear and Greed index is in the Neutral zone at 48 from 45 last week. The VIX/VXV ratio is back down to 0.885, which measures the spread between 1- and 3-month implied volatility, and under 0.80 shows market complacency while above 1.0 exhibits fear.