Superbowl Saturday Update

After three good weeks to end Jan, Feb started as a bust as the anticipated pullback to the SPX mid-4800s only made it to 4918 Mon AM.  The surge in a handful of tech stocks continued, esp a 50% pop in ARM on Wed, that sent the NDX just shy of 18K (up 75% since Oct 2022) and the SPX over 5K to 5029.  We now have extreme bullishness (SPX OI) next week with CPI/PPI Tue/Wed, so a negative surprise may be in store.  A good article by D. Tokic (no J/S) shows that core CPI may be sticky at the 3% level for much of 2024, forcing the Fed to delay any rate cuts to late 2024 or 2025.  Int rates may have also aided last weeks rally as hawkish comments by Minn Fed head N. Kashkari on Tue resulted in a pullback in the TNX to 4.05% before turning higher by EOW.  His recent article discussed the same point that I have been making about the lack of tightening from higher nominal rates due to historically low real rates using the 10 year TIPS rate (now 0.9%).

Overall sentiment remains neutral to negative and continues to indicate that an important INT decline is likely months away, but no indication of an immediate top.  One of the most accurate EW analysts the past several months is Dr. Schure (no J/S, new tab:copy link & paste, scroll)  was looking for a top of some significance for the SPX in the 5025-50 area, so last week may qualify.

I. Sentiment Indicators

The INT/LT Composite indicator (outlook 3 to 6+ months) has three separate components. Starting Aug 26, 2023 SPX options are removed due to extreme 0DTE volume distortions. New weights are ETF put-call indicator (30%), SPX 2X ETF INT ratio (40%), and 3rd a volatility indicator (30%) which combines the options volatility spread of the ST SPX (VIX) to the ST VIX (VVIX) with the UVXY $ volume.

Update Alt. Bearish sentiment is inching closer to the weak Sell area.

Update Alt EMA. Bearish sentiment is inching closer to the weak Sell area. 

The ST Composite as a ST (1-4 week) indicator includes the NYSE volume ratio indicator (NYDNV/NYUPV & NYDNV/NYDEC) and the UVXY $ Vol/SPX Trend. Weights are 80%/20%.

Update. Bearish sentiment increased slightly to above neutral.

Update EMA. Bearish sentiment remains below neutral.

The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (48%) and includes ST Composite (12%) and three options FOMO indicators using SPX (12%), ETF (12%), and Equity (12%) calls compared to the NY ADV/DEC issues (inverted). FOMO is shown when strong call volume is combined with strong NY ADV/DEC. See Investment Diary addition for full discussion. Update EMA. Bearish sentiment declined significantly to just above the weak Sell.

Bonds (TNX).  Bearish sentiment has reached a slightly lower extreme than in 2020.

For the INT outlook with LT still negative, the gold miners (HUI) bearish sentiment is presented in a new format using the data mining software to add the inverse TNX rate to the ETF ratio.

Update. Bearish sentiment improved slightly via the ETFs, but a break below the 200 level risks a breakdown from the apparent triangle.

II. Dumb Money/Smart Money Indicators

This is a new hybrid option/ETF Dumb Money/Smart Money Indicator as a INT/LT term (outlook 2-6 mns) bearish sentiment indicator. The use of ETFs increases the duration (term).

Update. Bearish sentiment dropped about 0.5 SD and is effectively at the weak Sell area.

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment dropped to below neutral.

A new composite SPX options indicator uses both the volume adj (1/B-A) and P/C equivalent spread (A-B) to compensate for the discrepancy between the two.  This replaces the old SPX options indicator for the SPX ETFs + options below and the INT/LT composite. No chart.

For the SPX, I am switching to hybrid 2X ETFs plus SPX options. Taking a look at the INT term composite (outlook 2 to 4 mns), bearish sentiment also dropped to the -0.5 SD area.

For the NDX combining the hybrid ETF options plus NDX 3X ETF sentiment with the interest rate effect,  (outlook 2 to 4 mns) bearish sentiment shows similar extremes between ETF and options as in late 2020 which resulted in a choppy market until options sentiment rose.  Note QQQ options are optimal, but are N/A and are included in ETF options.

Bearish sentiment remains midway between the weak and strong Sell areas.

For the SPX combining the hybrid ETF options plus SPX 2X ETF (outlook 2 to 4 mns) produces an indicator where, in this case, ETF options are a proxy for the SPY options.

Bearish sentiment for SPX decreased slightly to the weak Sell area.

III. Options Open Interest

Using Thur closing OI, remember that further out time frames are more likely to change over time, and that closing prices are more likely to be effected. Delta hedging may occur as reinforcement, negative when put support is broken or positive when call resistance is exceeded.  This week I will look out thru Feb 16. A text overlay is used for extreme OI to improve readability, P/C is not changed. Also, this week includes a look at the GDX for Dec exp.   A new addition is added for OI $ amounts with breakeven pts (BE) where call & put $ amounts cross.

With Fri close at SPX 5027, options OI for Mon is moderate with strong call resistance starting at 5030 and a large straddle at 4950.  A move to 5000 or lower looks likely

Wed has smaller OI where SPX has stronger put support at 4950 and the straddle at 5000 may keep prices in the 4975-5k area.

For Fri AM strong OI with SPX only partially straddled at 4950 and 5000  with net calls of about 15k calls should pressure prices to 4950 or lower.

For Fri PM moderate call resistance down to SPX 4950 leaves that or lower as the most likely target.

For Thur 29 EOM moderate OI shows the same bias as optn exp Fri with a bias to SPX 4950 or lower.

IV. Technical / Other

The following uses barcharts.com as a source and discusses S&P futures (ES) as a third venue of stock sentiment in addition to options and ETFs.  The non-commercial/commercial spread represents a LT bearish sentiment (dumb money/smart money) indicator. As explained in investopedia, commercial investors (red) are institutions and are smart money, while non-commercials (green) are speculators such as hedge funds and are dumb money. Here is the current  barchart graph for the S&P 500 (top) and trader positions (1st bot) with positives as net longs and negatives as net shorts.  Bearish sentiment is represented by the spread and is positive if red > green (Buy) and negative if green > red (Sell).  ES (SPX) sentiment is at a weak Buy + 1.0 SD, NQ (NDX) is a strong Sell at -2.25 SD, YM (DJIA) is a weak Sell at -1.5 SD, Dow theory no longer supports DJIA.

Click dropdown list to select from the following options:

Tech / Other History
2024
   02.03 An update of the INT and LT NYSE Adv/Dec volume indicates an important top may be near.    01.13 A look at LT SPX P&C, very high volume may compress range to 4650-4850 for mns, current Sell.
2023
   12.23 A quick update to the DJIA infl adj comparison presented as a possible analog Dec 2022    12.08 A look at the Feds recession indicator based on the unemployment rate using the Sahm Rule    10.21 A comparison of 5 year periods (1960s, 90s & today) for inflation and int rates (Fed funds & TNX)    09.29 A ST trend for TNX, INT/LT COT bearish for bond futures (TN), LT 20/30 yld curve    09.22 A look at Dow Theory and a DJIA diagonal and possible similarities to late 2015    09.15 Use of Brave browser Shield for enhanced internet access to some sites    07.22 A closer look at the 1966-74 markets indicate marginal new ATHs likely around 2024 Pres election    07.08 TNX since 2020 shows bounce likely temp w/ more back&fill before rounded bottom completes    07.01 Sentiment for BKX is at warning levels, Barcharts ES sentiment is now neutral.    06.24 Another update to VIX call indicator using VIX P/C; how volatility (VIX) effects options pricing    06.17 OTDE Volume & Put/Call Ratio Drilldown - low volatility (VIX) ahead    06.10 Volatility indicators warning of a nearing top    05.20 A review of indicators that performed well in 2015s rounded top    05.13 Comparing the VIX term structure (VIX/VXV) and volatility ratio (VIX/VVIX)    05.06 A review of the current int rates (TNX), unemployment and CPI compared to the 1960s    04.29 Addressing the negative M2 growth misconception, adding Barcharts ES outlook    04.15 Several LT/INT indicators show INT gains likely (SKEW&VIX/VXV,VIX/VVIX,BPSPX&SPXADP)    03.25 Comparison of PCE inflation and TNX rates to late 1990s indicates possible tech meltup    03.18 Strong SPX volume at Mar optn exp supports Spring rally of 10%+    03.11 Low SPX P/C ratio indicates likely trading range    03.04 LT T-bonds (10/20yr) => more Fed tightening, LT NYSE Adv/Dec volume => possible ATH retest    01.28 SPX correlation w/liquidity, Fed bal sheet - Treasury Gen Acct - O/N reverse repo    01.14 Volatility indicators, ST VIX calls indicate pullback SPX 200 pts, INT/LT SKEW & VIX/VXV still bullish    01.07 Gold performance relative to int rates (TNX), and China stock market (SSEC)
2022
   12.24 Late 1960s analog, TNX,Unempl & CPI => Recession 2024-25, DJIA top Feb'66 retest late '69    12.17 A contrarian view to the consensus 2022H2 recession & bear narket low of SPX 3000    12.10 Yield curve inversion (since 1980) not perfect recess indicator compared to inflationary 1960-80    11.26 Sentiment indicators showing a sharp drop late Dec as a setup for a strong Spring rally    11.19 Sentiment indicators showing choppy move higher likely before pullback    11.05 Using the SPXADP with the VIX call only indicator improves effectiveness

Other Indicators
   U.S. 10 Year Treasury Note (TNX Rate), Futures, Extended Hours    ES (S&P 500), Futures, Extended Hours +    NDX (NASDAQ 100), Futures, Extended Hours    Marketwatch Economic Release Calendar    INT/LT Rydex 3x Bear/Bull Fund Ratio    INT/LT NYSE Up/Down Volume 100 & 200 DMAs    S&P 500 Historical Charts with Inflation Adjustment    DJIA 100 Year Historical Charts with Inflation Adjustment

Conclusions.  It's beginning to look like Biden's gaffes are starting to catch up with him, perhaps Musk should volunteer one of his brain implant chips to control what he is saying, just hook it up to an AI unit and we could have the smartest Pres ever (just kidding).  Back to the markets, most traders will now be switching their focus to May for Fed rate cuts, but if inflation does not slow (oil is creeping up as ME conflict continues), a summer correction and Fall pre-election rally may follow.

Weekly Trade Alert.  AI mania could see a stress test with Feb 21 NVDA EPS, but so far the rally seems to be armor plated.  SPX OI indicates a pullback of about 2% is likely next week into EOM.  Updates @mrktsignals.

Investment Diary,  Indicator Primer, Tech/Other Refs,
 update 2021.07.xx  Data Mining Indicators - Update, Summer 2021,
 update 2020.02.07 Data Mining Indicators,
 update 2019.04.27 Stock Buybacks,
 update 2018.03.28 Dumb Money/Smart Money Indicators

Article Index 2019 by Topic, completed thru EOY 2020.02.04
Article Index 2018 by Topic
Article Index 2017 by Topic
Article Index 2016 by Topic

Long term forecasts

© 2024 SentimentSignals.blogspot.com