The SPX closed strongly higher by +4.2% on the week with all five trading days finishing in the green, an impressive rebound from last week’s selloff that was fully regained and supported by solid market breadth and a declining VIX. Last weeks selloff as noted came down to crucial support near 5400 which lined up with the 50% retracement and the midpoint of the uptrend channel that has been in place all year. The SPX now heads into the key FOMC week on the verge of a breakout to new highs and a very bullish looking pattern of an ascending triangle that could pop to highs after the rate cut announcement as the MACD is confirming a bull cross and RSI now back over 50. Short term support is at 5550 near the 8-day EMA and then 5500 a key line in sand to hold above now that upside momentum and positive gamma has been reclaimed. Many investors are aware of September seasonality being down the past 4 years but with election year Septembers quite a bit stronger than typical it would not be surprising to see an upside grind up move into quarter end now with sentiment a bit negative and could be enough to fuel a wall of worry move to new highs into 5750 or so which is actually the JPM collar short call strike and often can be a magnet into these quarter end expirations. But before quarter end we still have a large September triple witching OpEx this week which is also highlighted by VIX expiration Wednesday just before the FOMC announcement so the market may set up a short-term reversal later in week against whatever the prevailing early week trend suggests. Long term the weekly SPX chart held perfectly at the rising 21-week EMA and should continue to be a level to watch for any larger corrections into year-end as RSI does continue to show negative divergence, but for now that support at 5400 has held and buyers defended where needed.

Market Sentiment/Breadth

AAII sentiment for the week ending 9/11 showed bullish responses fall to 39.8% from 45.3% prior while bearish responses rose to 31.0% from 24.9%. Neutral sentiment moved to 29.3% from 29.8%. The bull-bear spread (bullish minus bearish sentiment) decreased 11.6 percentage points to 8.8%. The bull-bear spread is above its historical average of 6.5% for the 18th time in 19 weeks. The NAAIM Exposure index ticked up 71.93 from 70.65 last week and is still below last quarter’s average of 81.70. Total equity fund flows for the week ending 9/4 had $-10.1 billion of outflows in equities. Friday’s close saw NYSE new highs at 359, while new lows of 10 and the 10-day MA of New High/Low Differential is still positive at +162. The percentage of SPX stocks above their 50-MA fell jumped to 72.8% while those above their 200-MA was 74.2%. NYSI Summation index popped higher and is near a cross of its 8-MA for a short-term bullish signal. NYMO McClellan Oscillator closed at +39 and Neutral. The cumulative AD line had a strong thrust to new highs as it stayed 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 0.64. CNN Fear and Greed index is in the Neutral zone now at 49 from 39 last week. The VIX/VXV ratio closed at 0.86, after nearly hitting that 1.0 level that tends to mark lows in the market. This measures the spread between 1- and 3-month implied volatility, above 1.0 shows fear and can mark a low.