I. Sentiment Indicators
The overall Indicator Scoreboard has dropped firmly into the SELL area which may be one reason the SPX has stalled at the 2550 level.
The Short Term Indicator (VXX $ volume and Smart Beta P/C) has stalled out just below neutral, so it does not seem that a sharp decline is likely. The spike in the ST Indicator Aug 2017 resembled closely the Aug 2015 flash crash of SPX 130+ pts, even though the Aug 2017 decline was only 50+ pts. In 2015 the Aug decline was followed by a rally of about 150 pts into early Nov, and so far in 2017 the SPX is up 136 pts from the 2417 level. How much higher can it go?
Looking at some of the money flow ETF ratios, for the SPX the SPXU/UPRO is at the lowest level of the last three years, while the SQQQ/TQQQ would allow some improvement in the NDX. Not a lot of support for upside in the SPX.
Moving on to bonds (TNX), there was a fairly sharp reversal downward in short term sentiment as rates stalled out near the 2.4% resistance level.
For the gold miners (HUI), sentiment and prices remained relatively unchanged.
II. Options Open Interest
First, I want to point out another instance of the "new options" that showed up as calls on Monday for the Wed exp. From last week:
then on Mon when the SPY was 251 about 45k new calls showed up at SPY 253 with a price of $.10, then Wed with the SPY at 253.2, the calls closed at $.21 with a high of $.50 for the day. (ref Investors Diary 2017.09.15)
For next week with the SPY at 254.4, there is strong resistance at 255 and little support until 253, so a narrow trading range is expected.
For Fri, SPY 254.5 looks like a sweet spot but a move below 254 could go down to 242 or slightly lower.
For exp week, there is not much change with the "batman" formation raising the possibility of a sharp reversal, but the rising number of puts at 250 may limit any downside.
Conclusions. The VIX Indicator SELL from two weeks ago as well as most indicators point to a reversal soon, but the ST Indicator is still saying "not yet". I am completely surprised how the bears are holding on to their VXX longs and ETF puts like a dog with a bone, but so far the ST Indicator has been completely accurate. Looking to the 2015 period for comparison, slightly higher highs in the SPX 2560-70 range thru early Nov seems to be the likely outcome.
Weekly Trade Alert. Nothing this week, will be watching the "new options" for clues to any turn. Updates @mrktsignals.
Investment Diary, update 2017.10.xx, (in progress) Indicator Primer
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