I have refrained from giving SPX price targets the last two weeks other than
mention that the price of oil seemed to be the main driver of prices.
Last weeks somewhat positive sentiment (ST Composite and VIX call indicator) was
met by a rally from a Mon premarket low of about 6450 (ES) to 6650 after a Trump
tweet that "Iran was ready to deal" and he had proposed a 15 pt plan which drove
oil prices to about $88/bbl WTI. But by the EOW, it was clear that Iran
was not interested and as oil went over $100 Fri, the SPX dropped to new lows at
6356. Interestingly one EW analyst (Pretzel
Logic) had a target of 6356 for an ABC expanded flat, but no upside
projections yet. It's interesting that one of Trumps
Iran advisers, who was dismissed
for disagreeing with Trumps outlook, had published a report (Feb 24) predicting Iran's
current response to an attack and now thinks that the next step is escalation.
If that happens and oil moves to the $120-150/bbl range then the mid-low SPX
5k's are possible. CNN had an
interesting piece on the difficulties Trump is facing finding an off ramp.
Surprisingly bearish sentiment of most indicators declined last week even
after a decline in SPX of 2% as the calming of Trumps "escalate to
de-escalate".(a Putin strategy)
seemed to placate the bears. About the only increase in bearish sentiment was
high ETF put buying.
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 declined slightly from the spike the
previous week.
Update Alt EMA. Bearish sentiment declined slightly from the spike the
previous week.
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 is unchanged between weak and strong Buys.
Update EMA. Bearish sentiment is unchanged between weak and strong Buys.
The ST VIX calls and SPXADP indicator bearish sentiment dropped
back to neutral due to strong 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 fell back to neutral.
Update FOMO calls. Bearish sentiment continued its decline to neutral.
Bonds (TNX). Bearish sentiment remains at low extremes as the
TNX is very close to breaking out of a 3 year triangle over 4.5% (now 4.44%).
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 weak Sell level.
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 is little changed below neutral.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment dropped after last weeks spike back to
in-between neutral and a weak Buy.
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 remains near
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 continued to push higher and is now similar to Feb 2023, so
a counter trend bounce is possible
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 also remains above a weak Buy due to strong ETF put
buying..
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 Apr 2. 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 6389, options OI for Mon is moderate with good put support
up to 6450 and no call resistance until 6700.
Wed has large SPX OI where there appears to be a large put strangle at 6475 and
7000. This should rally SPX to at least 6475.
Thur (Fri is GF holiday) has moderate SPX OI where SPX has good put support at
cirrent levels.
For Fri Apr 17AM strong SPX OI also has about a 150k straddle at 7k similar to
March. With these straddles at SPX 7k apparently going out to June the risk of
negative delta hedging is huge.
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 + 0.25 SD, NQ (NDX) dropped below a weak Sell at -0.5 SD, YM (DJIA)
moved to a slight positive at
0.15 SD.
A quick look at gold (GC), bearish sentiment is in-between a weak and strong Sell at -1.5 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. One of the reasons I was looking for an important top
in June was the expected IPO of Musk's SpaceX which is expected to be in the
$75B range, or over 4X the largest US IPO's, META and VISA at $16B and $17B.
This represents a huge payday for Trumps WS buddies as well as Musk who could
become the 1st US$ trillionaire. Unfortunately Iran's resistance could put
a severe damper on that outlook. Trump seems to be amassing troops in the
ME to gain control of the Strait of Hormuz by occupying adjacent territory
(shore & islands).
Weekly Trade Alert. SPX is likely to remain under pressure as long
as oil remains over $100/bbl WTI. Updates @mrktsignals.
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