The SPX closed the week down nearly -3% but overall seeming much more violent on the downside since it was all in the last two days of the week after the FOMC meeting produced a bull trap right into the key gap fill level of 5550. The SPX is now back to the rising 21-week EMA that it touched precisely at 5300 and bounced late Friday so that is a key level to hold on a weekly timeframe chart basis and is also the anchored VWAP from April lows. The index has now faded 3 weeks in a row after warning that the large resistance at the 5640 lined up perfect with the long term 127.2% Fibonacci extension zone. Corrections always tend to come out of nowhere, but the signs were brewing that after July options expiration price action could get more volatile and we are getting that with the VIX spiking this week as a combo of fears escalating based on the weakening econ data showing the Fed is clearly dancing around the idea of rate cuts a bit too slowly. The yen carry trade unwinding also in Japan’s markets is producing a volatility bid that likely pressured margin calls on some. Regardless of the reasons, the SPX now sits just above key support of 5300 which could hold short term for a violent rally that would first see stiff resistance near 5400 then 5425 while any close below 5300 would usher in a ugly move back to the 5200 zone which is lining up with the 61.8% Fibonacci retracement support from the April lows.

Market Sentiment/Breadth

AAII sentiment for the week ending 7/31 showed bullish responses rise slightly to 44.9% from 43.2% prior while bearish responses fell to 25.2% from 31.7%. Neutral sentiment rose to 29.9% from 25.1%. The bull-bear spread (bullish minus bearish sentiment) increased 8.2 percentage points to 19.7%. The bull-bear spread is above its historical average of 6.5% for the 13th consecutive week. The NAAIM Exposure index rose to 83.93 from 76.70 last week and is near last quarter’s average of 81.70. Total equity fund flows for the week ending 7/24 had $-12.2 billion of outflows in equities. Friday’s close saw NYSE new highs at 158, while new lows of 116 and the 10-day MA of New High/Low Differential is still positive at +161. The percentage of SPX stocks above their 50-MA fell to 56.0% while those above their 200-MA was 69.6%. NYSI Summation index is curling down but still just above its 8-MA. NYMO McClellan Oscillator closed at -27 and back to below Neutral. The cumulative AD line is still 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 0.62 as the ratio itself spiked. CNN Fear and Greed index is in the Fear zone now at 27 from 45 last week. The VIX/VXV ratio closed at 1.002 and inverted slightly into the panic which could signal a potential low coming this week. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.