The SPX broke down to test the June lows into Friday before a 50-point end of day bounce formed a buying tail candle but not quite enough to create a hammer with confidence. Next week becomes crucial to hold the 3650 level and if below then the next key support comes in at 3580-3600 as a gamma level that dealers may defend. The large move lower last week felt near capitulation with the VIX finally above 30 and some washout breadth readings like those in June that were seen when over 1100 new lows registered on the NYSE. A bounce back would find first resistance at the 8 EMA near 3825 then the declining 21 EMA at closer to 3920. Overall, with quarter end next week volatility likely is to sustain until a close back above the 8 EMA or a steep decline in VIX back under 25.

Market Sentiment/Breadth

AAII sentiment for the week ending 9/21 showed bullish responses fall to 17.7% from 26.1% prior while bearish responses rose to 60.9% from 46.0%. Neutral sentiment fell to 21.4% from 27.9%. The results show that the percentage of individual investors describing their six-month outlook for stocks as “bearish” rebounded to its highest level since 2009. Plus, this week’s bullish sentiment reading ranks among the 20 lowest in the survey’s history. NAAIM Exposure index decreased to 29.59 from 33.86 and still below last quarters average of 41.75. Lipper fund flows for the week ending 9/21 had $2.3B of outflows in equities, the 5th straight week of outflows. Friday’s close saw NYSE new highs at 8 while new lows of 1106 and the 10-day MA of New High/Low Differential at -350. The percentage of SPX stocks above their 50-MA is 5.2% while those above their 200-MA was 15.0%. NYSI and NASI Summation index both bearish below 8-MA. NYMO McClellan Oscillator closed at -115 and is back to extreme oversold. Cumulative AD line is back under the 40 EMA and 89 EMA long term signal in bear mode. CBOE Equity P/C 50-day MA at 0.66 and back to recent highs. CNN Fear and Greed index in Extreme Fear zone at 24 from 36 last week.