I am going to use a new anacronym WOTT for watch out for Trump's tweets.
As it turned out the downside setup was reversed Sunday by Trumps tweet about a
promising meeting with China's Xi early Nov and that his 100% tariff bump was not
certain. As a result, instead of a drop and rally to SPX 6600 by
EOW, the SPX rallied back to 6700 by Wed, then dropped to 6600 Thur before the
Fri opt exp opening which was close to the BE at 6600 (act 6613), and a weekly
close at 6664. With the gov't shutdown continuing, the FOMC Oct 28-29 will
be operating in the dark since jobs and inflation data are not available, but an
additional 0.25% cut is expected.
Options OI is indicating that prices are
expected to rise modestly toward SPX 6700 in anticipation of a rate cut, but
fall by the EOM back to 6650. Both the upside target of SPX 6750 (act
6764) and the Oct 7 turn date appear to be confirmed by last weeks volatility,
but sentiment remains mostly neutral supporting the longer topping period
similar to late 2024-early 2025 as indicated by the LT NYSE Adv/Dec volume.
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 fell slightly.
Update Alt EMA. Bearish sentiment fell to just above 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 back to a weak Buy.
Update EMA. Bearish sentiment fell back to a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment fell
back toward neutral.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (52%)
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 reversed again back to in-between a weak and
strong Sell.
Update FOMO calls. Bearish sentiment fell from neutral to near a weak 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 above neutral as the vertical climb seems to
be topping. The HUI has now doubled the past few months as gold
rose 33%.
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 reversed sharply from near a strong Sell to
in-between a weak Sell and neutral.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment fell toward a weak Sell as ETF P/Cs were
weak.
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 declined below
neutral.
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 near a weak Sell.
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 remains below neutral.
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 Oct 24 & EOM. A text overlay is used for extreme OI to improve readability,
P/C is not changed. Also, this week includes a look at GDX & TLT for Nov exp.
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 Fri close at SPX 6664, options OI for Mon is moderate and shows a positive
bias with a wide support/resistance range.
Wed SPX OI is also moderate with stronger put support at 6650 and a positive
bias toward 6700.
For Fri SPX shows stronger OI, but more call resistance starting at 6700 and a
bias toward 6675.
For Fri EOM strong SPX OI shows a large call position at 6650 that should
provide a negative bias.
Using the GDX as a gold miner proxy closing at 78.7, shows a negative bias
toward the large call OI at 75. (last weeks high was 85)
Currently the TLT is 92.1 with the TNX at 4.01%, there is a slight negative bias
due to ITM calls.
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
positive at + .75 SD, NQ (NDX) remains at a weak Sell at -1.5 SD, YM (DJIA)
remains neutral 0.0 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Not much has changed since last week with a slight drop in
bearish sentiment. As Trump continues to extend his deadlines with China
and Russia, this may provide life support for the markets and with the gov't
shutdown providing a blackout for how the economy is doing, it is hard to tell
for how long. The drop in oil prices below $60/bbl does provide a positive
for the inflation outlook.
Weekly Trade Alert. SPX may stay in the range of 6650-6725 thru
FOMC 28-29th. Updates @mrktsignals.
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