The SPX tried to bounce off its key 61.8% fib retracement level at 3900 this week before getting rejected at the declining 8 EMA overhead and coming back lower to end the week. The 4000-resistance level continues to be a line in sand for the short term and proving to be a ceiling under prices can close above. The 3900 support is clearly crucial at this point but below that has an open gap near 3800 as the next large support zone. On a upside move there is likely to still be stiff resistance near the converging 21 and 55 EMA at around 4060. MACD is in bearish mode after crossing down and RSI is getting oversold back down at 35 with other key short term breadth signals like NYMO also signaling a snapback bounce possible. Potential to see a lower open Tuesday that is bought for a turnaround higher but gap up’s are likely to be sold.

Market Sentiment/Breadth

AAII sentiment for the week ending 8/31 showed bullish responses fall to 21.9% from 27.7% prior while bearish responses rose to 50.4% from 42.4%. Neutral sentiment fell to 27.7% from 29.9%. The results from the latest AAII Sentiment Survey show optimism about the short-term direction of the stock market falling to an eight-week low. At the same time, pessimism rose to an eight-week high. The pullback puts optimism back at an unusually low level. NAAIM Exposure index decreased to 32.36 from 54.86 and back under the last quarters average of 41.75. Lipper fund flows for the week ending 8/31 had $10.6B of outflows in equities. Friday’s close saw NYSE new highs at 18 while new lows of 101 and the 10-day MA of New High/Low Differential at -30. The percentage of SPX stocks above their 50-MA is 35.6% while those above their 200-MA was 27.8%. NYSI and NASI Summation index both bearish below 8-MA. NYMO McClellan Oscillator closed at -95 and is very oversold short term. Cumulative AD crossed back below the 40 EMA and 89 EMA long term signal. CBOE Equity P/C 50-day MA at 0.65 and curling higher. CNN Fear and Greed index in Fear zone at 41 from 55 last week.