In the Land of Oz, Follow the Yellow Brick Road (Gold)

Last week was expected to see a continuation of the relief rally from Trumps 90 day stay on reciprocal tariffs for everybody but China (at least until he changed his mind) while trade negotiations continued.  The monthly SPX options exp OI supported a move to 5500+ and the week started strong with a move to SPX 5450, but another shocker appeared Wed when Trump sited national security risk to prevent the sale of the lower end (H20) NVDA AI modules to China.  This dragged down the tech sector with NVDA falling 10%+, and Thur weaker EPS guidance (-10%) by UnitedHealth caused the stock to fall 20% and shaved almost 800 pts off the DJIA. 

For the week Pretzel Logics triangle was the clear winner with the lows at SPX 5225 completing his "d wave" with a move to 4600-4700 expected after "e wave" up is completed.  However, I still think a test of last weeks high at SPX 5481 (5480-5520) is possible (red declining line) to clear bearish sentiment before a larger decline (odds at 50/50).  One possible reason was announcement of a "letter of intent" between the US and Ukraine on a rare earth minerals deal late Thur.  The Tech/Other section looks at this possibility comparing sentiment from the Rydex Bear/Bull 3x fund ratio to the 2022 bear market (Feb) with the 4th wave triangle of wave A down.  An update of the LT NAAIM index also shows a 20 pt drop to similar levels as Feb 2022.

Sentiment remains modestly positive overall, but near-term market direction can remain at the whim of Trumps directives.  Ie, was the NVDA action a reciprocal action to Chinas export limits on rare earth minerals or a response to competition from the DeepSeek software?  Similar actions with other companies will be a negative, but other developments such as the Ukraine minerals deal can be a positive.  With buyers front-running the tariffs, Q1I sales, EPS and GDP may be stronger than expected for the short-term.

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 to in-between the weak and strong Buys.

Update Alt EMA. Bearish sentiment remains positive but below a weak Buy.

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 remains in-between weak and strong Buys.

Update EMA. Bearish sentiment is below a weak Buy.

The ST VIX calls and SPXADP indicator remains at a weak Buy.

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 is close to neutral.

Bonds (TNX).  Bearish sentiment remains at low extremes.  The gap at 4.270% may have been filled with a drop to 4.725%.  Trader Joe did a LT chart of TNX from 2020 last week showing a 2 yr triangle with an upside target of 5.5% or higher. 

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 rise as prices move higher and could mean more upside.

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 continued retreating to neutral.

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment retreated slightly.

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 increased slightly to .5 SD.

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 below a weak Buy.

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 retreated to a weak Buy.

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 25. 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 & IBIT for Mar 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 5283, options OI for Mon is small with put support up to 5300, but could move higher with call resistance in the mid 5450s.

Wed has smaller OI where SPX has put support up to 5500.

For Fri strong put OI could result in strong positive delta hedging but no targets are seen.

For EOM Wed Apr30 stronger OI, esp puts, show strong put support up to 5500 and could push prices toward SPX 5500 or higher.

Using the GDX as a gold miner proxy closing at 50.9, could see positive delta hedging over 50, but below 50 support is 47-8.

Currently the TLT is 87.5 with the TNX at 4.33%, 87-91 is essentially neutral due top straddles.  Support is 85 and resistance 92

IV. Technical / Other

Last week the Rydex 3x ETF Bear/Bull Ratio reached the Buy level matching the level of the Jan 2022 lows which could indicate that the SPX could be in a long and painful period as it took twice as long and twice a % drop in 2025 as in 2022.  The next chart shows details for 2022.

In 2022, the first wave down (A) was 5 waves with a small triangle (T1) comparable to the current triangle in 2025.  Interesting, the SPX ATH in 2022 was 4819, 20 pts below the recent low early Apr, and the projections of the current triangle breakdown at 4600-700 are very similar to the Mar 2022 top.  In 2022, the triangle did see a fake breakout at 4595 (dbl top) before the 5th wave down started, so I am giving a 50/50 chance of a test of 5480+ before a larger decline.  As noted the wave 5 could also see a bottoming triangle.

The NAAIM weekly active managers exposure index had risen from 49% to 57% two weeks ago after the Trump tariff reprieve, but last week fell 22 pts to a low of 35 very similar to the low of Feb 2022 supporting the idea of a near term bounce.

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 remains neutral at -0.0 SD, NQ (NDX) bearish sentiment remains at a weak Sell at -1.25 SD, YM (DJIA) is neutral at 0.0 SD.

Click dropdown list to select from the following options:

Tech / Other History
2025
   04.19 An SPX 2022 bear market analog and an update of the LT NAAIM Index.    04.12 How golbalism has effected foreign purchases of US debt since 1980.    04.05 A comparison to SPX 2020 covid crash and a look at LT NAAIM Index.    03.29 Corporate profits to GDP since 1980 show strong growth from globalism.    03.22 A comparison to Trump 1.0 trade war results for the SPX.    03.15 Update of Technical Indicator Composite & SKEW plus VIX term structure.    01.25 Update of NYSE Adv/Dec volume now at Sell level & SKEW shows warning of INT top (1-3mns).
2024
   12.15 Comparison of NYSE Adv/Dec volume lows to peaks in SKEW shows ST (1 month) warning of INT tops.    12.06 High peaks in SKEW since 2018 have been early warning of INT tops as sign of "max" options bearishness.    09.07 A look at DJIA/SPX analog from the 2000 market top shows possible strength into year-end.    05.25 A possible rounded top aka May 2015, Initial Claims lead Unempl Rate, LT NYADV/Dec warning.    02.17 A potential analog to early 2007 with early Spring and Summer pullbacks before Fall rally.    01.13 A look at LT SPX P&C, very high volume may compress range to 4650-4850 for mns, current Sell.
2023
   12.23 A quick update to the DJIA infl adj comparison presented as a possible analog Dec 2022    12.08 A look at the Feds recession indicator based on the unemployment rate using the Sahm Rule    10.21 A comparison of 5 year periods (1960s, 90s & today) for inflation and int rates (Fed funds & TNX)    09.29 A ST trend for TNX, INT/LT COT bearish for bond futures (TN), LT 20/30 yld curve    09.22 A look at Dow Theory and a DJIA diagonal and possible similarities to late 2015    09.15 Use of Brave browser Shield for enhanced internet access to some sites    07.22 A closer look at the 1966-74 markets indicate marginal new ATHs likely around 2024 Pres election    07.08 TNX since 2020 shows bounce likely temp w/ more back&fill before rounded bottom completes    07.01 Sentiment for BKX is at warning levels, Barcharts ES sentiment is now neutral.    06.24 Another update to VIX call indicator using VIX P/C; how volatility (VIX) effects options pricing    06.17 OTDE Volume & Put/Call Ratio Drilldown - low volatility (VIX) ahead    06.10 Volatility indicators warning of a nearing top    05.20 A review of indicators that performed well in 2015s rounded top    05.13 Comparing the VIX term structure (VIX/VXV) and volatility ratio (VIX/VVIX)    05.06 A review of the current int rates (TNX), unemployment and CPI compared to the 1960s    04.29 Addressing the negative M2 growth misconception, adding Barcharts ES outlook    04.15 Several LT/INT indicators show INT gains likely (SKEW&VIX/VXV,VIX/VVIX,BPSPX&SPXADP)    03.25 Comparison of PCE inflation and TNX rates to late 1990s indicates possible tech meltup    03.18 Strong SPX volume at Mar optn exp supports Spring rally of 10%+    03.11 Low SPX P/C ratio indicates likely trading range    03.04 LT T-bonds (10/20yr) => more Fed tightening, LT NYSE Adv/Dec volume => possible ATH retest    01.28 SPX correlation w/liquidity, Fed bal sheet - Treasury Gen Acct - O/N reverse repo    01.14 Volatility indicators, ST VIX calls indicate pullback SPX 200 pts, INT/LT SKEW & VIX/VXV still bullish    01.07 Gold performance relative to int rates (TNX), and China stock market (SSEC)
2022
   12.24 Late 1960s analog, TNX,Unempl & CPI => Recession 2024-25, DJIA top Feb'66 retest late '69    12.17 A contrarian view to the consensus 2022H2 recession & bear narket low of SPX 3000    12.10 Yield curve inversion (since 1980) not perfect recess indicator compared to inflationary 1960-80    11.26 Sentiment indicators showing a sharp drop late Dec as a setup for a strong Spring rally    11.19 Sentiment indicators showing choppy move higher likely before pullback    11.05 Using the SPXADP with the VIX call only indicator improves effectiveness

Other Indicators
   U.S. 10 Year Treasury Note (TNX Rate), Futures, Extended Hours    ES (S&P 500), Futures, Extended Hours +    NDX (NASDAQ 100), Futures, Extended Hours    Marketwatch Economic Release Calendar    INT/LT Rydex 3x Bear/Bull Fund Ratio    INT/LT NYSE Up/Down Volume 100 & 200 DMAs    S&P 500 Historical Charts with Inflation Adjustment    DJIA 100 Year Historical Charts with Inflation Adjustment

Conclusions.  Triangles everywhere, but which way to go.  The outlook for the coming week is non-committal.  It's possible to just go sideways, but the EOM SPX options OI is showing another strong possibility of a move toward SPX 5500 and a late week deal with Ukraine could be the catalyst.  For some reason the Mar CPI (Apr 10) seems to have been overlooked, but the monthly was -0.1% and 2.4% annual.  With FOMC date May 6-7 and June 17-18, two more low CPIs could be close to 2% by June and lead to a softer tone from Powell.  Could also coincide with market lows if Trump does not get what he wants from negotiations or bond vigilantes revolt.

Weekly Trade Alert.  If triangle breakdown not imminent this week, next week could see a fake breakout to the upside.  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

© 2025 SentimentSignals.blogspot.com-

The Earthquake May Be Over, but Is There a Tsunami Coming

Last weeks winner appeared to be Trader Joe whose ES/SPX target near 4800 was close enough at 4838 and the 5600-700 upside looks possible.  Trump apparently decided to dial back the rhetoric and Wed mid-day announced a 90 day stay on reciprocal tariffs for everybody but China and stocks exploded higher with a 10% rally from SPX 4950 to 5481.  This weekend he has also announced an exemption on reciprocal tariffs on a number of electronic items, which include China, and appear to specifically target big tech such as APPL and NVDA.  Weekend indications (ig.com) are a 3%+ gain for NDX and 2% for SPX, so SPX 5600-700 is looking more likely.  Possibly the most interesting was that Trump posted "Now is a Great Time to Buy" on Truth  Social 3 hrs before the Wed announcement, perhaps to increase his following and the value of his interest in TS.

Last week did, however, give a hint as to what could be the reason for a second leg down when bonds (TNX) showed a sharp reversal from its downtrend from a Jan high of 4.8% to an Apr 4 low at 3.9%.  Mon saw a sharp jump from about 3.97% to 4.25% on the announcement of a $1T defense budget and again on Wed to 4.4% when the Senate passed Trumps tax cut bill and increased the Federal debt limit by $5T from $35T to 41T.  If DOGE and other tax cuts are supposed to be saving so much money, why does the Trump admin need to spend $5T more than Biden?  One possible reason for the increase rates is a seondary effect of tariffs as discussed in Tech/Other.

Bearish sentiment has increased to the point where a sustained rally could occur and could even extend to nominal new highs into the Fall as happened after the 2018 tariff episode, but I think the next leg down is more likely to be from rising int rates as the "tariff shock" has mostly passed.  With the TNX the breakout over the "bull flag" has left a gap at 4.3%, which is about a 38% retrace from the 4.6% high, and is likely to be filled.  A decline in rates will help stocks rally and the SPX OI for next weeks monthly exp on Thur shows SPX 5500+ as a likely target.  If the rally in rates continues as an ABC and A=C, then next target is 5%, and any higher than that is likely to see a new low for the 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 spiked to a strong Buy Mon/Tue at the SPX 4800 lows, but retreated to just inside the weak Buy by EOW.

Update Alt EMA. Bearish sentiment declined to the week to about .5SD after an early spike over a weak Buy.

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 on a short timeframe gave a strong Buy at the lows an an in-between weak/strong Buy at EOW.

Update EMA. Bearish sentiment (LT view) reached a strong Buy at the lows but retreated to a weak Buy by EOW.  Comparing sentiment at the SPX lows to other selloffs, the Covid lows were much stronger while current sentiment is comparable to Oct-Nov 2018 and mid-2022, where each was only the first leg down with a lower low yet to come.

The ST VIX calls and SPXADP indicator bearish sentiment rose to just shy of a strong Buy, then retreated to a weak Buy.

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 spiked above a strong Buy but retreated to below a weak Buy by EOW and seems incomplete.

FOMO calls rose to a strong Buy, but compared to 2022 may indicate only a ST bounce.

Bonds (TNX).  Bearish sentiment remains at low extremes.  Rates had been declining in an down channel (bull flag) from mid-Jan at 4.8% thur early Apr, but reversed on the 4th from a 3.9% low.  Over the next six days rates rose to 4.6% on Fri. 

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 overall is slightly below neutral, while ETF sentiment is slightly positive.

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, but below levels seen at prior INT lows.

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment briefly spiked to a strong Buy VST before falling back to below 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 reversed from below to above 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 improved significantly, rising from a weak Sell to in-between neutral and a weak Buy.

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 sharply based on strong ETF P/Cs to in-between a weak and strong Buys.

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 17. 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 & IBIT for Mar 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 5363, options OI for Mon is small.  Premarket looks to open over SPX 5400 resistance so next target is 5450 or higher.

Wed has somewhat larger OI where SPX OI is also strong and could see some pullback with call resistance at 5425 and 5475, but Thur strong put support is likely to support a move toward 5500.

For Thur AM (Good Fri is Holiday) strong SPX OI shows a strong bias toward SPX 5500.

For Thur PM strong SPX OI shows a bias to 5500+.

IV. Technical / Other

This week I want to look at the foreign investors holdings of US debt as a percent of GDP and why it may be driven by trade globalism.  First, a primer of intl trade by J.Maudlin looks as trade having three components goods (G), services (S), and financial assets, mainly bonds (B).  Here, with Trumps policies, he only considers G.  For example if the US buys $100B (80B in G, 20B in S) from country X and X buys $100B from US ($40B in G, 40B in S and $20B in B) then Trump/Navarro call this a $40B deficit looking only at the purchase of G and demands that country X buy more of G from US.  However, since they only receive $100B from US (US $), country X must buy less or sell some of S or B.

The following chart shows the effects as foreign holdings of US debt as % GDP increased from 5% in 1980 to 35% when Trump was first elected.  The trend was down until Biden was elected, but when he kept the Trump tariffs the selling continued and now stands around 25% or $8T.  In 2016 China was the largest holder with over $1T in US debt and had dropped down to $750B early this year.  Likely they have been selling more and that may be why rates rose last week.  Japan is now the largest holder with $1T US debt and recent USD weakness may have also caused them to sell.

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 remains neutral at -0.0 SD, NQ (NDX) bearish sentiment remains at a weak Sell at -1.5 SD, YM (DJIA) is neutral at 0.0 SD.

Click dropdown list to select from the following options:

Tech / Other History
2025
   04.05 A comparison to SPX 2020 covid crash and a look at LT NAAIM Index.    03.29 Corporate profits to GDP since 1980 show strong growth from globalism.    03.22 A comparison to Trump 1.0 trade war results for the SPX.    03.15 Update of Technical Indicator Composite & SKEW plus VIX term structure.    01.25 Update of NYSE Adv/Dec volume now at Sell level & SKEW shows warning of INT top (1-3mns).
2024
   12.15 Comparison of NYSE Adv/Dec volume lows to peaks in SKEW shows ST (1 month) warning of INT tops.    12.06 High peaks in SKEW since 2018 have been early warning of INT tops as sign of "max" options bearishness.    09.07 A look at DJIA/SPX analog from the 2000 market top shows possible strength into year-end.    05.25 A possible rounded top aka May 2015, Initial Claims lead Unempl Rate, LT NYADV/Dec warning.    02.17 A potential analog to early 2007 with early Spring and Summer pullbacks before Fall rally.    01.13 A look at LT SPX P&C, very high volume may compress range to 4650-4850 for mns, current Sell.
2023
   12.23 A quick update to the DJIA infl adj comparison presented as a possible analog Dec 2022    12.08 A look at the Feds recession indicator based on the unemployment rate using the Sahm Rule    10.21 A comparison of 5 year periods (1960s, 90s & today) for inflation and int rates (Fed funds & TNX)    09.29 A ST trend for TNX, INT/LT COT bearish for bond futures (TN), LT 20/30 yld curve    09.22 A look at Dow Theory and a DJIA diagonal and possible similarities to late 2015    09.15 Use of Brave browser Shield for enhanced internet access to some sites    07.22 A closer look at the 1966-74 markets indicate marginal new ATHs likely around 2024 Pres election    07.08 TNX since 2020 shows bounce likely temp w/ more back&fill before rounded bottom completes    07.01 Sentiment for BKX is at warning levels, Barcharts ES sentiment is now neutral.    06.24 Another update to VIX call indicator using VIX P/C; how volatility (VIX) effects options pricing    06.17 OTDE Volume & Put/Call Ratio Drilldown - low volatility (VIX) ahead    06.10 Volatility indicators warning of a nearing top    05.20 A review of indicators that performed well in 2015s rounded top    05.13 Comparing the VIX term structure (VIX/VXV) and volatility ratio (VIX/VVIX)    05.06 A review of the current int rates (TNX), unemployment and CPI compared to the 1960s    04.29 Addressing the negative M2 growth misconception, adding Barcharts ES outlook    04.15 Several LT/INT indicators show INT gains likely (SKEW&VIX/VXV,VIX/VVIX,BPSPX&SPXADP)    03.25 Comparison of PCE inflation and TNX rates to late 1990s indicates possible tech meltup    03.18 Strong SPX volume at Mar optn exp supports Spring rally of 10%+    03.11 Low SPX P/C ratio indicates likely trading range    03.04 LT T-bonds (10/20yr) => more Fed tightening, LT NYSE Adv/Dec volume => possible ATH retest    01.28 SPX correlation w/liquidity, Fed bal sheet - Treasury Gen Acct - O/N reverse repo    01.14 Volatility indicators, ST VIX calls indicate pullback SPX 200 pts, INT/LT SKEW & VIX/VXV still bullish    01.07 Gold performance relative to int rates (TNX), and China stock market (SSEC)
2022
   12.24 Late 1960s analog, TNX,Unempl & CPI => Recession 2024-25, DJIA top Feb'66 retest late '69    12.17 A contrarian view to the consensus 2022H2 recession & bear narket low of SPX 3000    12.10 Yield curve inversion (since 1980) not perfect recess indicator compared to inflationary 1960-80    11.26 Sentiment indicators showing a sharp drop late Dec as a setup for a strong Spring rally    11.19 Sentiment indicators showing choppy move higher likely before pullback    11.05 Using the SPXADP with the VIX call only indicator improves effectiveness

Other Indicators
   U.S. 10 Year Treasury Note (TNX Rate), Futures, Extended Hours    ES (S&P 500), Futures, Extended Hours +    NDX (NASDAQ 100), Futures, Extended Hours    Marketwatch Economic Release Calendar    INT/LT Rydex 3x Bear/Bull Fund Ratio    INT/LT NYSE Up/Down Volume 100 & 200 DMAs    S&P 500 Historical Charts with Inflation Adjustment    DJIA 100 Year Historical Charts with Inflation Adjustment

Conclusions.  The primary result of Trumps economic policies, "tariff shock", may have passed, but secondary effects, an "int rate shock" or "inflation shock" may still remain and may catch everyone offguard as the worst seems to be over.

Weekly Trade Alert.  Next week will likely be positive with Trumps announcement of popular tech items for exclusion from tariffs, at least until he changes his mind.  SPX options OI are indicating a likely run to 5500 or higher before the Easter Holiday.  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

© 2025 SentimentSignals.blogspot.com

Trump Starts a Nuclear Trade War

Trump 2.0 trade war started late Jan with Trump throwing grenades as tariffs, but everyone expected him to step up his game last week by using a bazoka.  However, much to everyone's surprise Trump went full scale nuclear with his reciprocal tariffs with our largest trading partner, China, getting a combined 54% tariff.  Estimates for the cost of almost everyting increased with the price of a new car expected to jump from $8,000 to 16,000, but as explained in last weeks Tech/Other, if consumers can't afford to buy, prices wil rise less and cut into profit margins.  Stocks did not like it as the SPX started as planned with an initial drop to 5000 (target 5550-5650) then a rise to 5550 Tue.  Wed was crazy as promised with a rise to 5700 before the close, then in the A/H further gains were seen in the SPX futures for about 10 min, then the next 20 min saw a 200pt drop when the tariff increases were announced.  Selling continued throughout Thur & Fri for a second 10% drop in SPX to close at 5074.  Is Trump a madman or a genius?

Trump has stated all along that he "will do whatever it takes" to get the job done where several objectives include extending his tax cuts, reducing the federal debt, lowering int rates (TNX), and starting a sovereign wealth fund.  Tariffs are the main tool to fund his objectives.  His tax cuts seem to be well on the way with passage of the Senate reconciliation bill.  Int rates (TNX) have dropped from a high of 4.8% in Jan to below 4% with a 15% drop in the SPX, so another 15% (SPX 4250) could drop rates to near 3%, and a third 15% (3500) could be near 2%.  Now use the oppty created by the tariff chaos to refinance the debt at a 50% lower LT rates and tax cuts are paid for.  Although this may sound preposterous, this exact outcome is outlined for the ES by Trader Joe this weekend in his monthly expanding diagonal scenario.  Now use the tariff funds to start a sovereign wealth fund by investing in the S&P 500 thru cash/futures and when stocks recover Soc Security will be funded.

That may work for while, but if TJ is right, the next ATH will be W5 of SC3 or SC5, then the real fun begins.  Personally, I think TJ may be underestimating the current decline as there are several indications that a repeat of the early 2020 covid decline might be more relevant where a st line decline of 35%+ or about 3970 for SPX is similar to TJs 82% retrace for the SPX w3 of 3500 pts.  I prefer 3800.  A look at this weeks sentiment shows very little bearishness to support a large rally at this time.  There also seems to be an alternation on the LT sentiment charts where less extreme bullish sentiment (Sell) was seen before the covid crash compared to 2022 bear market.  The Tech/Other section has charts and more discussion of the 2020 analog and a look at the LT NAAIM exposure index.

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 has moved above neutral, but in 2022, even the corrective rallies saw a strong Buy so little support at this time.

INT volatility. Bearish sentiment for the volatility component looks like the action is just getting started.

Update Alt EMA. Bearish sentiment shows much higher levels compared to the 1st leg down in 2022.

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 barely at the weak Buy.

Update EMA. Bearish sentiment is barely at the weak Buy.

The ST VIX calls and SPXADP indicator bearish sentiment moved above neutral from last weeks weak Sell, but well short of a weak Buy.

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 above neutral but below a weak Buy.

Update FOMO calls. Bearish sentiment rose above neutral but below a weak Buy. 

Bonds (TNX).  Bearish sentiment remains at a low extreme.

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 toward neutral with the sharp drop Fri.

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 below neutral.

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment VST hit the strong Buy level with ETF puts rising to 3x last two years avg,  but LT sentiment remains 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 fell as BTFD hits the long ETFs.

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 as buying of short SQQQ has improved sentiment to neutral along with the ETF options.

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 improved with ETF option sentiment.

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 11. 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 & IBIT for Mar 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 5074, options OI for Mon is small (bottom cutoff, only puts with 1000pts) wher a move over 5100 could go to 5240, but little support until 4500.

Wed has small OI where SPX has little support until 4500.

For Fri SPX has strong put support at 4850 and 4900 and should keep prices above those levels by EOW.

IV. Technical / Other

The following two charts compare the SPX performance today to the 2020 Covid crash of 35%.  Both charts show an initial move from above the 50 SMA to below the 200 SMA as they were flattening and and an initial recovery of the 200 SMA before a large decline.  In EW, 2020 seemed to be 3 waves with w3 longer timewise.  So far in 2025 w3 is long in pts but short in time.  For both w3s the early declines have been large, so 2025 may see smaller declines drag prices lower for several weeks.  Previously, I had indicated that an event, probably a Fed dovish turn or maybe tax cuts, were likely necessary to turn things around.  A Ukraine peace seems unlikely. 

Many EWers think a tradeable low is near, but sentiment indicators shown above do not agree.  Avi is looking for a low around SPX 4950, then 5850 before lower lows.  TJ (see top) sees ES low about 4800 then 5600 before 4000.  One of the best ST outlooks has been Pretzel Logic thinks 5100 or 4700 are likely inflection pts.

I Haven't talked about the NAAIM active manager index because I wanted to look at a LT chart which took longer than expected.  Here is a chart since early 2019.  There are two apparent cycles as 60-100% seems to be the ST cycle in a bull phase, but in a bear phase the range drops to 20-70%.  So for the LT outlook a 60-100% range is bearish.  Currently we are a long way from the 20% level at 47%.

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 remains neutral at -0.0 SD, NQ (NDX) bearish sentiment remains at a weak Sell at -1.5 SD, YM (DJIA) is neutral at 0.0 SD.

Click dropdown list to select from the following options:

Tech / Other History
2025
   03.22 A comparison to Trump 1.0 trade war results for the SPX.    03.15 Update of Technical Indicator Composite & SKEW plus VIX term structure.    01.25 Update of NYSE Adv/Dec volume now at Sell level & SKEW shows warning of INT top (1-3mns).
2024
   12.15 Comparison of NYSE Adv/Dec volume lows to peaks in SKEW shows ST (1 month) warning of INT tops.    12.06 High peaks in SKEW since 2018 have been early warning of INT tops as sign of "max" options bearishness.    09.07 A look at DJIA/SPX analog from the 2000 market top shows possible strength into year-end.    05.25 A possible rounded top aka May 2015, Initial Claims lead Unempl Rate, LT NYADV/Dec warning.    02.17 A potential analog to early 2007 with early Spring and Summer pullbacks before Fall rally.    01.13 A look at LT SPX P&C, very high volume may compress range to 4650-4850 for mns, current Sell.
2023
   12.23 A quick update to the DJIA infl adj comparison presented as a possible analog Dec 2022    12.08 A look at the Feds recession indicator based on the unemployment rate using the Sahm Rule    10.21 A comparison of 5 year periods (1960s, 90s & today) for inflation and int rates (Fed funds & TNX)    09.29 A ST trend for TNX, INT/LT COT bearish for bond futures (TN), LT 20/30 yld curve    09.22 A look at Dow Theory and a DJIA diagonal and possible similarities to late 2015    09.15 Use of Brave browser Shield for enhanced internet access to some sites    07.22 A closer look at the 1966-74 markets indicate marginal new ATHs likely around 2024 Pres election    07.08 TNX since 2020 shows bounce likely temp w/ more back&fill before rounded bottom completes    07.01 Sentiment for BKX is at warning levels, Barcharts ES sentiment is now neutral.    06.24 Another update to VIX call indicator using VIX P/C; how volatility (VIX) effects options pricing    06.17 OTDE Volume & Put/Call Ratio Drilldown - low volatility (VIX) ahead    06.10 Volatility indicators warning of a nearing top    05.20 A review of indicators that performed well in 2015s rounded top    05.13 Comparing the VIX term structure (VIX/VXV) and volatility ratio (VIX/VVIX)    05.06 A review of the current int rates (TNX), unemployment and CPI compared to the 1960s    04.29 Addressing the negative M2 growth misconception, adding Barcharts ES outlook    04.15 Several LT/INT indicators show INT gains likely (SKEW&VIX/VXV,VIX/VVIX,BPSPX&SPXADP)    03.25 Comparison of PCE inflation and TNX rates to late 1990s indicates possible tech meltup    03.18 Strong SPX volume at Mar optn exp supports Spring rally of 10%+    03.11 Low SPX P/C ratio indicates likely trading range    03.04 LT T-bonds (10/20yr) => more Fed tightening, LT NYSE Adv/Dec volume => possible ATH retest    01.28 SPX correlation w/liquidity, Fed bal sheet - Treasury Gen Acct - O/N reverse repo    01.14 Volatility indicators, ST VIX calls indicate pullback SPX 200 pts, INT/LT SKEW & VIX/VXV still bullish    01.07 Gold performance relative to int rates (TNX), and China stock market (SSEC)
2022
   12.24 Late 1960s analog, TNX,Unempl & CPI => Recession 2024-25, DJIA top Feb'66 retest late '69    12.17 A contrarian view to the consensus 2022H2 recession & bear narket low of SPX 3000    12.10 Yield curve inversion (since 1980) not perfect recess indicator compared to inflationary 1960-80    11.26 Sentiment indicators showing a sharp drop late Dec as a setup for a strong Spring rally    11.19 Sentiment indicators showing choppy move higher likely before pullback    11.05 Using the SPXADP with the VIX call only indicator improves effectiveness

Other Indicators
   U.S. 10 Year Treasury Note (TNX Rate), Futures, Extended Hours    ES (S&P 500), Futures, Extended Hours +    NDX (NASDAQ 100), Futures, Extended Hours    Marketwatch Economic Release Calendar    INT/LT Rydex 3x Bear/Bull Fund Ratio    INT/LT NYSE Up/Down Volume 100 & 200 DMAs    S&P 500 Historical Charts with Inflation Adjustment    DJIA 100 Year Historical Charts with Inflation Adjustment

Conclusions.  I am running short on time so I think every thing has been said above.  Bearish levels do not indicate a tradeable rally anytime soon, but the brunt of the decline may be over soon. I would not be surprised to see another 10% decline early next week to about SPX 4500 before a counter trend rally to 4800-900 by end of week.  Ultimate lows are expected by early to mid May near or below SPX 4000.

Weekly Trade Alert.  Mon_Wed may see a continued decline toward SPX 4500 before an EOW rally to SPX 4800-900.  CPI is Thur a low number may help.  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
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