Last week was expected to see a reversal from the recent selloff in tech with
a weak Buy in the ST Composite, VIX Calls & SPXADP and Dumb Money/Smart money
indicators with SPX options OI indicating 6700-50 from 6600. The surprise
this time was to the upside with strength in techs from the three (A)migos
(AAPL,AMZN,Alphabet//GOOGL) offsetting continuing weakness in NVDA and BTC.
Metas purchase of GOOGLs AI tensor TPUs was seen as a blow to the effectiveness
of language processing AI tasks for NVDA GPUs.
ST/INT bearish sentiment fell from neutral/positive to neutral/negative as
the positive ST indicators from last week fell from positive to neutral, while
the ST/INT Composite moved from neutral to negative based on high call volume
(FOMO) and a lower hedge spread. A ST pullback is likely below SPX 6800
next week, but higher prices may be seen the week of the 10th with the FOMC
expected to lower rates again. In an unusual twist, no inflation data
since before the gov't shutdown will be available until the week after the FOMC
meeting although oil prices have been stable and food prices are declining
somewhat.
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 remains relatively unchanged above
neutral. A spike in SDS/SSO sentiment that may be related to ETF splits was
offset by UVXY $ volume.
Update Alt EMA. Bearish sentiment rose mid-week on a one-day spike in SSO
volume but closed the week mostly unchanged.
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 from over a weak Buy to below a weak Buy.
Update EMA. Bearish sentiment fell from over a weak Buy to
below a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment dropped
from a weak Buy to neutral on a high SPXADP.
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 fell from below neutral to a strong Sell (VST)
based on strong call volume and lower hedge spread.
Update FOMO calls. Bearish sentiment fell from neural to just below a weak
Sell with strong call volume.
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 fell back toward a strong Sell with a surge in
silver to ATHs.
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 sharply from a weak Buy VST (grn) to below
neutral.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment fell 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 rose to a weak Buy
on a one-day surge in SSO volume that may be split related.
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 rose above neutral and could be ETF split related.
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 rose to a weak Buy, but could be ETF split related.
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 Dec 5. 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 Fri close at SPX 6849, options OI for Mon is moderate with a large OI in
calls at 6900 as strong resistance and below 6850 could fall to 6800.
Wed has small SPX OI where call resistance between 6870-6950 may limit advances.
For Fri strong SPX OI call resistance between 6870-6900 should limit advances
with some put support below 6800.
Wed 10th FOMC has very small SPX OI where call resistance is is 6950 and put
support starts at 6825.
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 remains
positive at + .5 SD, NQ (NDX) is more negative at -2.25 SD, YM (DJIA) is positive at +.5 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. SCOTUS has been quiet after the first discussions
regarding Trumps tariffs and if no decision is made before mid-Dec, it is likely
to be delayed into 2026. Last weeks rally was stronger than expected and
markets may be on hold until the following week with the Fed expected to lower
rates at the Dec 9-10 FOMC meeting.
Weekly Trade Alert. SPX options OI is indicating that a drop next
week is likely below 6800 with a range of about 6775-6875. Updates @mrktsignals.
Last week was a major surprise due to the extreme weakness prior to the after
hours Wed EPS for NVDA. I had been warning about potential problems with
the AI business model (low profitability, high energy usage) for months, but
last week seemed to be the "gotcha" moment.
PhilStockWorld seemed to have the
best summary on Mon with the focus on CoreWeave (CRWV) as a cloud computing
platform that leases high-performance GPUs for AI. The last six weeks
while BTC has fallen 33%, CRWV has fallen 50%, and CRWV appears to be the canary
in the coal mine. NVDA EPS did produce a sharp rally and reversal only
from levels about 150 SPX pts lower than expected (6650 to 6770 then down).
Sentiment remains asleep at the wheel, as only the ST Composite and DM/SM
indicator moved to a weak Buy on last weeks pullback. Futures (COT) did
show some changes with NQ moving to a strong Sell, but YM turning positive.
The result be a mostly a sideways market thru the EOY unless SCOTUS reaches a
decision on Trumps tariffs. BTC and CRWV are the canaries to watch for
further tech weakness. BTC is near TL support going back to early 2024.
News from China shows the
potential for solving future energy problems with a working thorium molten salt
reactor. Thorium is a byproduct of rare earth extraction and China and
India have the largest known reserves with enough for about 1000 years of energy
for China. Oddly, the process was first investigated by the US, then
abandoned when it could not be weaponized.
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 rose, but remains short of a weak
Buy.
Update Alt EMA. Bearish sentiment remains just over neutral.
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 rose back above a weak Buy.
Update EMA. Bearish sentiment rose sharply into Wed to near a strong Buy
then fell back to a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment rose from neutral to a weak Buy.
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 remains below neutral.
Update FOMO calls. Bearish sentiment remains near neutral.
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 remains at a strong Buy after a 10% correction.
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 rose sharply to a weak buy and continues to mirror
other retail sentiment measures such as the CNN Fear & Greed Index which fell to
a 9 just above the April lows.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose from below neutral to 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 fell after the
weak Buy did not pan out.
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 rose slightly to neutral.
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 Nov 28. 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 Fri close at SPX 6603, options OI for Mon is moderate where a move over
6610 should go to 6650 and below 6610 negative delta hedging can push toward
6550.
Wed has smaller SPX OI with little call resistance until 6750.
For Fri strong SPX OI and put support up to 6700 should push prices up to
6700-50.
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 less
positive at + .5 SD, NQ (NDX) is more negative at -2.0 SD, YM (DJIA) is a
positive at +.5 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. The tech bubble may be bursting, but a stock market
collapse may not be imminent just yet. The good news Fri was the Fed Pres
Williams indicated that would support lower int rates if the labor market
continues to weaken. The bad news is that a similar situation occurred in
2000 when the tech bubble burst at the same time as the end of a Fed tightening
cycle, the result was continued strength in the cyclicals (DJIA,RUT) even as
techs continued to falter and that masked the decline for almost a year.
Today this could mean a H&S pattern for the SPX with the bottom of the right H
near 6550 and only a partial recovery, this can be best seen in BTC with the
lower left H at 78k in Apr.
Weekly Trade Alert. Options OI for SPX is indicating a partial
recovery to 6700-50 by EOW. Updates @mrktsignals.
Last weeks outlook was a continuation of the rally from the SPX 6630 area to
6850 or above into mid-month, and although faster than expected, the Wed high
was 6870 before a pullback began. There was little news other than
some indication of further jobs weakness, but prices collapsed to 6725 on Thur
and 6647 on Fri before a late rally. One likely reason for the selloff was
the SCOTUS hearing on Trumps tariffs where
the oral arguments
(no J/S) were not
supportive and several of the betting sites that were just below 50% favoring
Trump dropped to about 25% with many expecting an 8 to 10% pullback if Trump
loses. The increase in volatility is similar to the period preceding the
late 2021 and early
2025 tops where
both saw new ATHs before the collapse. As discussed in the arguments
article, an unfavorable ruling could be viewed as a ST positive due to lower
inflation pressure, but LT would increase deficits and make implementation of
growth plans more difficult.
T.McClellan had an interesting
report this week about stock performance after Hindenburg Omen observations
going back to 2011. The current HO count is now up 5 in the last two weeks
or about every other day. Internal bearish sentiment is mostly unchanged
to lower, but retail bearish sentiment (AAII)
jumped to 49% or 12% below the April low for SPX
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 pushed somewhat higher early in the
week then fell back toward neutral.
Update Alt EMA. Bearish sentiment pushed somewhat higher early in the
week then fell back toward neutral.
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 for the week but remains near a weak Buy.
Update EMA. Bearish sentiment remains close to a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment fell back to neutral
with high call buying on down days.
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 moved back toward a weak Sell.
Update EMA. Bearish sentiment fell back below neutral.
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 remains at a strong Buy.
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 remains near neutral.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment is little changed at just 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 continued to rise,
reaching a weak Buy.
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 rose slightly toward neutral.
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 rose farther above 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 Nov 24 & EOM. 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 Fri close at SPX 6734, options OI for Mon is moderate with strong put
support at 6730 and below which explains the massive rallies late in the day
from the mid-6600s. BE at 6815 indicates the potential for a rally to 6800
or higher.
Wed has small SPX OI where SPX with similar support levels.
For Fri AM strong SPX OI has changed $OI with the drop from 6840 two weeks ago
from a 40% P/C to favor some upside with a BE still at 6750 and strong call
resistance at 6900.
For Fri PM moderate SPX OI shows call resistance over 6800 and a BE still at
6750.
For Fri 28th EOM moderate/strong OI shows heavy support at 6750 and below and
little call resistance until 6900. May help if SCOTUS tariff decision
disappoints.
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. More holes are appearing in the AI forever mantra as a
recent report on the data centers
in tech mecha CA shows that there is not enough available electricity to power
them. It's beginning to look more like the intro to "Terminator" the
movie, as soon as mega AI figures out that the best way to get more power is to
eliminate humans, watch out. Another concern is the SKEW which I may do a
report on soon, after peaking around 175 in Feb 2025, the last SPX ATH only saw
a 155 SKEW. LT divergences are unusual and happened prior to the 2000 and
2008 tops.
Weekly Trade Alert. It looks like SPX closes
are likely to remain between 6725 and 6875 for a while. Updates @mrktsignals.
