Morning Notes — Contrarian Support

The SPX is building a short-term technical base below the 9/2 all-time closing high of 3580.  Many SPX constituents have already moved from short-term overbought into technical oversold status.  ‘Overbought’ and ‘oversold’ are technical measurements of price and time.  Spending more time above technical support at ~3220 would set the stage for a test of the highs, while levels above ~3450 would mean the base building phase is complete.  Note the wide range.

Still light equity positioning, record cash balances and elevated/extreme bearish sentiment continue to support markets.  Market tops aren’t made on light equity positioning and elevated bearish sentiment.  The latest monthly fund manager survey shows cash increased to 4.8% from 4.6% last month.  Every one of these managers has been trained on the performance drag that results from holding cash. Individual investors are holding record cash reserves and US money supply growth is running at +23.3% year-over-year.  Meanwhile the corporate outlook continues to improve and an earnings recovery seems well underway with estimates rising across nearly every GICS sector.