Inside Markets — Near-Term Caution

The SPX keeps its bullish shape above ~6350, which means the primary trend is still higher despite seasonal headwinds, increased supply and fading fund flows in the back half of September.  Near-term caution is warranted in our view as systematic positioning (CTAs and vol control funds) is now in the 99th percentile and represents asymmetric risk at popular triggers.  We’d expect to see initial CTA supply on a break below ~6370 and selling from vol control funds would trigger as the VIX trades above 20.  Note that positioning metrics for the discretionary community and broad equity sentiment remain at benign levels/not a factor.  Given the time of year, we’d react to a break below ~6350 but see key technical support at 6147.