The SPX options OI provided several inflection pts posted on Twitter as Tue pullback was indicated to find support at 2925 (2924 act) then rallied into Wed FOMC with resistance at 2950 (2054 act), where potential was indicated first to 2920-30 (2923) then 2900-20 (2900.5). Next week shows an early week range of 2930-50, while a late week pullback to 2900-25 is indicated. Interestingly, now both XI and Trump are talking about walking away, so next weeks trade talks may end up as a disappointment.
I. Sentiment Indicators
The overall Indicator Scoreboard (INT term, outlook two to four months) bearish sentiment increased modestly, but not enough support a rally, except for a Jan 2018 type blowoff.
The INT view of the Short Term Indicator (VXX+VXXB $ volume and Smart Beta P/C, outlook two to four months) bearish sentiment remains very low and the declining bottoms (from Jan and Oct) may be pointing to a larger degree correction after a top is in.
Bonds (TNX) bearish sentiment has declined even as rates moved higher much like it did in Sep 2017.
For the INT outlook with LT still negative, the gold miners (HUI) bearish sentiment H&S pattern does seem to be playing out as the drop to the bottom of the larger left shoulder is at 150. Options OI does support a rally into June (160 possible).
II. Dumb Money/Smart Money Indicators
For this week and possibly for the next several months, I am going to replace the DM/SM ETF indicators with other indicators.
The option-based Dumb Money/Smart Money Indicator as short/INT term (outlook 2 to 4 mns/weeks) sentiment saw a decent bounce that may be like Dec 2017, but not enough to normally support a rally.
And the sister options Hedge Ratio sentiment is pretty much the same.
The INT term SPX Long Term (2x/DM) ETFs (outlook two to four weeks) bearish sentiment remains very low.
While the INT term SPX Long Term (3x/SM) ETFs bearish sentiment did increase more.
The INT term NDX Long Term (2x/DM) ETFs (outlook two to four weeks) bearish sentiment is weak but not extreme.
III. Options Open Interest
Using Wed close, remember that further out time frames are more likely to change over time, and that closing prices are more likely to be effected. This week I will look out thru May 10. Also, This week includes a look at the TLT for May.
With Fri close at SPX put support at 2930 and call resistance at 2950 should limit moves to this range.
Wed similar to Mon with a slightly stronger upward bias.
For Fri with large open int, everyone seems to be betting on positive outcome for the China trade talks, but a move down toward the 2900 level looks likely.
Using the GDX as a gold miner proxy. For May exp (no charts) showed weak put support at 21 with a close at 20.3. Jun does show increased put support up to 22.
The TLT 20 year bond fund is used as a proxy for interest rates. For the last several years when the TNX was 112 when the TNX was 3.2% (11/2018), the TLT was 124 when the TNX was 2.5% (12/2017), and the TLT was 140 when the TNX was 1.5% (08/2016).
Currently the TLT is 123.7 with the TNX at 2.53%. The Twitter update was looking for a drop to 123 which was seen on Mon and Thur, before moving higher. For May 17, put support should lift prices to 124+.
IV. Technical / Other
For those that like daily updates, I found some old links for Rydex Bear & Bull Funds that update on Stockcharts.com. This chart was pretty useless for about 10 years after 2008 because the bear fund lost most of its assets to competitors (vol prod, etc) , but the last two years did pretty good at the Jan and Oct 2918 tops. Note the SELL line is at 3.75% Bear/Bull. Due to the small bear fund size this may be unreliable. Comparing this to the SPX ETFs using avg daily $ volume for 2019 shows SDS/SSO as $182m/$172m, and SPXU/UPRO 165m/230m.
Probably more important, looking at the Rydex Bull only, is the fact that the level of bullishness is significantly below where it was at the two 2018 tops. Hence an immediate top is not expected.
Conclusions. Bearish sentiment has only increased modestly, so the overall outlook for a rounded top with a minor correction of 2-3% is still valid. China trade talks seem to be at an impasse, but both sides may be trying to call the others bluff. This was a really poorly designed strategy by POTUS since there is almost no recourse to verify or enforce the actions of the other party. Other than setting up an exchange of "trade police", the WTO was probably the best solution, but the US has withdrawn. A complete failure by late summer as suggested last Sept is looking more likely
Weekly Trade Alert. Friday's rally may setup a distribution pattern that will eventually take the SPX below 2900 if disappointment is seen by the EOW with the China trade talks. Updates @mrktsignals.
Investment Diary, Indicator Primer, update 2019.04.27 Stock Buybacks, update 2018.03.28 Dumb Money/Smart Money Indicators
Article Index 2019 by Topic
Article Index 2018 by Topic
Article Index 2017 by Topic
Article Index 2016 by Topic
Long term forecasts
© 2019 SentimentSignals.blogspot.com
No comments:
Post a Comment