Last week was a surprise as the SPX and other stock indices may have completed a "blowoff top" just before Trump announced round two of the tariff/trade war. This time he is sending out letters announcinng "levies" if a trade agreement is not reached by his July 9 pause deadline. Overseas stocks are down with US stocks expected to follow. Someone asked where is all the money coming from for the continuous buying. My suspicion is much has come from the same Trump minions that bought Trump coins and memes, and last week as a last hurrah the AAII investment survey showed the biggest weekly gain I have ever seen, jumping from a below average 35% to an above average 45% bullish, and the NAAIM active manager exposure index jumped from 81% to 99%, the same level as the Dec 2024 SPX high. The SPX did make a slightly higher high in Feb before the real decline, and a Bradley turn date of Aug 13 may indicate some thing similar around the time that SCOTUS is expected to make its ruling on Trumps power to use tariffs.
In-house sentiment indicators mirrored the NAAIM and AAII sentiment indicators with the ST Composite dropping below a weak Buy and the VST (5 dy) EMA to neutral. The VIX call & SPXADP indicator dropped more sharply to near a strong Sell, while the FOMO call indicator dropped below a weak Sell. Other INT indicators did not see as aggressive drop in bearish sentiment and may indicate a topping period of several weeks that could coincide with the Bradley Aug 13 turn date.
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, INT view. Bearish sentiment retreated but remains short of a weak Sell.
Update Alt EMA. Bearish sentiment retreated but remains short of a weak Sell. 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, SMA only]. Weights are 80%/20%.Update. Bearish sentiment fell below a weak Buy.
Update EMA. Bearish sentiment fell further below a weak Buy with VST (grn) to neutral.The ST VIX calls and SPXADP indicator bearish sentiment fell sharply below neutral to near a strong Sell.
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 fell further below a weak Sell.
Update FOMO calls. Bearish sentiment also fell sharply from in-between neutral and a weak Sell to between a weak and strong Sell. Bonds (TNX). Bearish sentiment remains at low extremes. For the INT outlook, 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 rose but remains near neutral.
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 fell to a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment rose back toward a weak Sell. 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 rose back above
neutral.
Bearish sentiment rose slightly.
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 fell slightly.
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 July 11. A text overlay is used for extreme OI to improve readability, P/C is not changed. A new addition is added for OI $ amounts with breakeven pts (BE) where call & put $ amounts cross. Note multiply OI$ by 100 for shares/contract.
With Thur close at SPX 6279, options OI for Mon is moderate where ITM call value greatly exceeds put value. A pullback to 6200-50 is likely.
Wed has small SPX OI with strong call resistance at 6275. Downward pressure to/below 6200 is possible.
For Fri moderate SPX OI shows put support in the 6150 to 6200 area. Downside could hold around 6150.
For Fri 18th mn exp strong SPX OI shows potential downside to 6100-50 or lower is possible with a huge straddle at 6000 a possibility.
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) bearish sentiment is slightly positive at 0.5 SD, NQ (NDX) bearish sentiment jumped over weak Sell at -1.5 SD, YM (DJIA) remains near a weak Sell at -0.5 SD.
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Conclusions. The last several weeks have all the earmarks of panic
buying since the bombing of Irans nuclear sites. Weak economic data was an
excuse to buy with lower int rates expected, while strong data (Thur jobs
report) was also bought. The strong jumps in NAAIM active money managers
index and AAII retail bullish sentiment is a strong indication that everyone is
"all in", so who is left to buy? Inflation reports (CPI/PPI) are out the
15th/16 with monthly opt exp on the 18th so the near term focus will be
trade/tariff outcomes that should increase volatility.
Weekly Trade Alert. SPX options indicate that a ST pullback to 6200
or lower is likely. 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
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