The SPX closed lower for the week by -2.3% and failed to close back over the 8 EMA on a late week bounce that saw sellers step in midday Friday as the index tried to clear its key 50% fib retrace from the recent highs and the 4540 resistance clearly showed failure. The SPX has now closed below its 21-day EMA two days straight for the first time since early May, and the bearish divergence on RSI mentioned last week is playing out lower. The next obvious support level below 4500 is the rising 55 EMA at 4400 which comes in right at the midpoint of the uptrend channel in place since the beginning of the bull market back in October and price has respected the upper and lower ends of the channel for months now, so it bears watching. Below the 4400 level would clearly need to see a catalyst driven selloff be triggered but the lower end of the channel comes in at 4175-4200 which is strong support from back in May. A bounce back this week would not be too surprising if markets started weaker and reversed back up to challenge 4500 and then 4550.

Market Sentiment/Breadth

AAII sentiment for the week ending 8/2 showed bullish responses rise to 49.0% from 44.9% prior while bearish responses fell to 21.3% from 24.1%. Neutral sentiment fell to 29.7% from 31.0%. The bull-bear spread (bullish minus bearish sentiment) increased 6.9 percentage points to 27.7%. The bull-bear spread reached an unusually high level for the second time in three weeks and remains above average for the ninth consecutive week. The NAAIM Exposure index decreased sharply to 78.46 from 101.82, but still slightly above last quarter’s average of 70.22. Lipper fund flows for the week ending 8/2 had $-1.9B of outflows in equities, with 2 of the last 3 weeks seeing outflows. Friday’s close saw NYSE new highs at 111 while new lows of 38 and the 10-day MA of New High/Low Differential is positive at +92. The percentage of SPX stocks above their 50-MA is 61.8% while those above their 200-MA was 63.8%. NYSI Summation index has crossed below its 8-MA and now in a short term sell signal. NYMO McClellan Oscillator closed at -34 and still in a Neutral zone but nearing oversold short term. The cumulative AD line is pulling back but still solidly 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, back below one year lows. CNN Fear and Greed index is in Greed zone at 69 from 78 last week. VIX/VXV ratio is popping to 0.919, which measures the spread between 1- and 3-month implied volatility, and under 0.80 shows market complacency while above 1.0 exhibits fear.