The expected early decline Mon to SPX 5950 was sidelined by Trumps claim that
Iran was ready to negotiate and prices pushed well over 6000 (6050) to start the day, but
as the claim was not substantiated, SPX prices were unchanged by EOD. Strength
was expected early in the week due to the weak Buy from the ST Composite, but
after attempted rallies again Tue/Wed/Thur the SPX fell to a low late Fri (5952)
before closing in the target range at 5968 (5925-75). The late fade was likely due
to Trumps claim that the US may join Israel to destroy Iran's alleged nuclear
enrichment program. Iran was first accused of enriching uranium 20 years
ago, so it makes you wonder where the results are.
Ther was a big jump in the weekly NAAIM Active Managers Exposure Index from
83% to 94% at Wed close and the last jump this large was mid-May before a drop of
almost 200 SPX pts so a ST drop into early July is possible. The ST
Composite and SPX options OI are again this week showing early strength possible
Mon-Wed to 6000 with weakness into EOM to SPX 5900 area. Trumps two week
window before US military action seems to fit into this outlook. Longer
term, the two month consolidation (flat) seen in the late 2015 and 2018 analogs before
new lows fits better with the Supreme Courts rulling on Trumps tariff standing
expected late July to mid-Aug.
Fridays decision to wait until the lower appeal court's ruling is considered a
positive indicator for Trumps position.
Overall, a slight increase in bearish sentiment was seen, but a surprisingly
large decrease in SPX options sentiment occurred, similar to the period prior to
the mid-May decline.
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 further below neutral.
Update Alt EMA. Bearish sentiment fell slightly further below 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 continued to rise above neutral.
Update EMA. Bearish sentiment fell mid-week then the very ST (grn) rose back
to a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment remains near 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 rose well above a weak Sell.
Update FOMO-calls. Bearish sentiment rose toward 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 fell slightly.
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 slightly above a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose above 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 fell sharply to
below neutral after a weak Buy a week & a half ago.
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 moved lower from 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 fell sharply to a weak Sell, nearing levels before
the May decline.
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 June 27 & 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 July/Sept 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 5968, options OI for Mon is moderate with high P/Cs and a
BE of 6000, indicating strength to start the week, similar to last week,
targeting BE at 6000.
Wed SPX has smaller OI with more OTM calls and a BE at 5995 indicates some
strength, but weaker than Mon. A possibe slow fade similar to last week
For Fri strong SPX OI has large straddles (67% P/C) that should continue to pull
prices lower with BE at 5950 or slightly lower for the week.
For EOM Mon stronger SPX OI wher large call position at 5900 (JPM hedged fund)
is likely to continue to pressure prices lower toward BE at 5905.
Using the GDX as a gold miner proxy closing at 52.3, positive delta hedging
could push to 54 if over 52, but below 52 BE near 50 is possible.
Currently the TLT is 86.5 with the TNX at 4.38%, BE at 86 indicates a tight
range around current levels with a slightly negative bias (higher rates).
IV. Technical / Other
This week I wanted to take a brief look at the Combined Put-Call Revised
indicator (Equity + ETF + SPX), .
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
remains near a weak Sell at
-0.75 SD, YM (DJIA) remains near a weak Sell at -0.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. SPX prices continue to reflect strong resistance at
the 90% retracement of Trumps tarrif selloff, but it remains to be seen if that
was the last hurrah or just an opening salvo. I had not been paying
attention to the Supreme Court, but a positive nod could be all Trump needs to
come back even stronger. A longer term decision which may result in a breakout
in int rates is the outlook for a new Fed chairman which could be decided in
Nov. Trump seems to think that lowering ST rates will cause LT rates to
decline, but the opposite is more likely.
Weekly Trade Alert. Rinse and repeat seems to be the outlook for
next week with early strength, possibly thru mid-week to SPX 6000 with a late
fade to 5900 or lower thru the EOM. Updates @mrktsignals.
Last weeks warning of a possible ST/INT inflection at the 90%
retracement for the TACO rally at SPX 6016 proved timely, at least on Fri.
Mon-Thur seemed like a struggle above SPX 6000 as early momentum weakened
mid-day and faltered at the close. The surprise attack on Iran by Israel
o/n Thur saw a sharp decline in stock futures and sharp rally in oil and gold
prices. The result was a drop to SPX 5960, down almost 100 pts from the
weeks high, before a close at 5977.
Its been almost almost two years since Hamas attacked an Israeli
civilian crowd and Israel has been on an almost non-stop war against various
militant groups since, many whom were funded by Iran. It somewhat reminds
me of the US response to the 9/11 attacks on the US. Another factor which
could be a strong motivation is that Russia has also been supportive of
militant groups in the ME with weapons and training, but the Ukraine conflict
has all but eliminated Russian support in the ME. If so, Israel may see
this as a generational opportunity and it may mean a wider conflict than most
expect.
Last week I incorrectly identified the ST Composite and VIX call indicators
as near weak Sells, as it was the FOMO call and VIX call indicators near weak
Sells. Both of the later improved from weak Sells halfway to neutral or
higher, however, the Hedge Spread showed a sharp drop in hedging thru Thur,
halfway to a strong Sell, before closing at a weak Sell. The ST Composite
5 day EMA (grn) jumped to a weak Buy so early weakness is likely to be reversed
Mon-Tue, but options OI is still negative later in the week with targets of SPX
5925-75.
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 dropped slightly below neutral.
Update Alt EMA. Bearish sentiment dropped for the week from above to below
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 slightly at the EOW.
Update EMA. Bearish sentiment very ST (grn) rose to a weak Buy, a ST bounce
is possible.
The ST VIX calls and SPXADP indicator bearish sentiment rose toward neutral
from a weak 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 rose slightly, but remains near a weak Sell.
Update FOMO-Calls. Bearish sentiment reversed from a weak Sell, but remains
below neutral.
Bonds (TNX). Bearish sentiment remains at low extremes.
Surprisingly rates rose from 4.35% as inflation fears offset a flight to safety.
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 continues to fall as prices remain near highs.
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 at a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment fell sharply thru Thur in-between the
weak and strong Sells before closing just below a weak Sell. More
volatility is expected.
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 from 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 fell back to 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 declined from near 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 June 20. 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 5977, options OI for Mon is small with strong put support
at 5900 and call resistance at 6050. Smaller put support extends up to
6000 and early weakness is likely to be reversed by the close.
Wed SPX options OI is very small with support from 5950 down and resistance from
6000 up. A range of 5950-6000 is expected.
For Fri AM strong SPX OI shows a negative bias due to large ITM call position,
but is offset by large put position at 6000 straddle. With BE at 5910,
range 5925-75 is likely.
For Fri PM moderate OI with similar setup to AM where 5925-75 looks likely.
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 increased to 0.5 SD, NQ (NDX) bearish sentiment
remains near a weak Sell at
-0.75 SD, YM (DJIA) remains near a weak Sell at -0.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. I have been fairly sanguine for the inflation outlook thru
June-July, even indicating that a 2% CPI was possible, thereby giving the Fed
room to lower rates if the tariff turmoil continued. However, with
Trumps tariff reversal/pause and stocks near new highs, there is less pressure
for the Fed to act. Most have been expecting higher prices, but the Q1 GDP
showed a strongly negative net exports as sellers were "stocking up" before the
tariffs took effect and that has likely delayed higher prices due to tariffs
until Q3 & Q4. If the Israel/Iran conflict lasts for several months,
higher oil prices will also contribute to more inflation. So with the
tariff "pause" possibly expiring in July, the second half of 2025 could be full
of negative surprises.
Weekly Trade Alert. After early weaknes to SPX 5950 or lower a
bounce to 6000 is possible by mid-week, but lower prices (5925-75) are expected
by EOW. Updates @mrktsignals.
Some strength was expected last week, esp for the Fri jobs report, after a
potential weak start. After an early Mon pullback to below the SPX
5975-6000 target to 5960, the SPX rallied over 100 pts to 5980 Wed before
another pullback late Thur prior to the jobs report as the ADP survey indicated
a sharp decline. However, Fri continued to show a strong economy with
130k+ new jobs and an unchanged unemployment rate. The SPX peaked at 6017,
with the exact 90% retrace of the Feb-Mar decline at 6016 and closed at 6000.
With the ST Composite and the VIX call indicator both nearing a weak Sell, it
may be time to start being cautious. In the May 2 Tech/Other look at the
2015 "avian flu" panic as a possible analog due to similar strength in the NYSE
Adv/Dec volume, a 90% retrace was also seen before lower lows. Two weeks
ago the SPX options OI pointed out the huge straddle at 6000 for the June 20 exp
as a possible attraction point and the gains came earlier than expected.
Now a look at options are showing a more negative bias with strong resistance at
SPX 6000 and EOM/EOQ showing large call resistance at 5900 (likely the JPM
hedged ETF). Next weeks CPI/PPI reports are not expected to be much of a
surprise.
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 improved slightly above neutral.
Update Alt EMA. Bearish sentiment improved slightly above
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 declined from near a weak Buy to near neutral.
Update EMA. Bearish sentiment declined from near a weak Buy to near neutral.
The ST VIX calls and SPXADP indicator bearish sentiment declined from neutral
to near a weak 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 declined to slightly below a weak Sell.
Update FOMO calls. Bearish sentiment dropped sharply to near a weak Sell.
Bonds (TNX). Bearish sentiment remains at extreme lows as rates
whipsawed lower with the ADP jobs outlook then back up Fri.
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 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 is slightly lower near a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment improved slightly but remains near 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 to nearer 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 from a weak Sell to near 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 also rose to 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 Jine June 13. 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 6000, options OI for Mon is small, but strong call
resistance ar 6000 and 6025 will likely result in some weakness.
Wed options OI is very small and resistance at 6000 likely means a test of
5975-6000.
For Fri very strong put support, probably due to CPI/PPI on Wed/Thur should keep
prices in the 5975-6000 range.
For Fri 20th monthly exp strong option OI shows a negative bias, but the large
straddle at 6000 as mentioned May 30 is likely a strong attraction point.
For Mon EOQ strong call resistance at 5900 (likely the JPM hedged ETF) indicates
expected weakness for the EOM.
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 remains neutral below 0.25 SD, NQ (NDX) bearish sentiment
is unchanged near a weak Sell at
-0.75 SD, YM (DJIA) is near a weak Sell at -0.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Patience is probably warranted if you are a bear.
It's really impossible to tell how Trumps tariff negotiations will work out.
The TACO lable (Trump always chickens out) may have been good for the stock
market, but is not likely to help with the negotiations. Now that China is
taking a more aggressive stance to exporting rare earth elements, it is time to
see who is bluffing. Another leg down still seems more likely to reset
bearish sentiment before a larger rally in 2026 into the mid-term elections.
Weekly Trade Alert. Some weakness is possible next week, but
probably not worth worrying about. Updates @mrktsignals.
