The SPX closed lower by over 4% in the week in a rather unexpected reversal to start the month after closing the prior week at nearly new highs. Price action clearly now has work to do to regain its short-term moving averages as a first objective with the 8/21 EMA nearly crossing over down at the 5525 level above. Any rebound this week would likely be met with stiff resistance first at 5500 and then 5525. While support is clearly at this current level of 5400 and has the 50% retracement shown at 5385 so a potential to see an early week move lower find support for a reversal back up from this short-term oversold condition. A lower support would be the 61.8% Fibonacci retrace at 5322 and a key level to hold on a closing basis or this uptrend from the August lows would be more likely fully retraced. For now, there is still a lot of choppy rangebound action potential into mid-month when the next key catalyst is the FOMC meeting and if prices can stabilize near current levels that would setup a possible rebound that could be quite sharp into or after the FOMC rate cut that the market clearly wants clarity on. MACD has crossed over with RSI back under 50 so for now rallies are likely to be sold into until SPX sees a close back above 5525 roughly on the upside. Looking at the weekly chart while there has been some bearish divergence forming on RSI, the current selloff is merely coming back to the rising 21-week EMA so a weekly close below this level at 5385 would show a change in momentum longer term perhaps. Watching the VIX this week will again be crucial as it did fade off highs Friday so a close back under 20 can be a signal of pressure easing.

Market Sentiment/Breadth

AAII sentiment for the week ending 9/4 showed bullish responses fell to 45.3% from 51.2% prior while bearish responses also fell to 24.9% from 27.0%. Neutral sentiment jumped to 29.8% from 21.9%. The NAAIM Exposure index fell to 70.65 from 81.34 last week and is now back below last quarter’s average of 81.70. Total equity fund flows for the week ending 8/28 had $-13.6 billion of outflows in equities. Friday’s close saw NYSE new highs at 151, while new lows of 98 and the 10-day MA of New High/Low Differential is still positive at +191. The percentage of SPX stocks above their 50-MA fell back down to 59.0% while those above their 200-MA was 68.2%. NYSI Summation index crossed below its 8-MA for a short-term bearish signal. NYMO McClellan Oscillator closed at -43 and nearing Oversold. The cumulative AD line pulled in from new highs but 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 0.64. CNN Fear and Greed index is in the Fear zone now at 39 from 63 last week. The VIX/VXV ratio closed at 0.98, nearing 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.