Last weeks outlook was for strength into Wed with SPX indicating a target of
5850+ and the high was 5851. Thur EOM was expected to be weak with more
volatility due to low hedging with an expected retest of 5800, but weak tech
earnings and a technical breakdown of a bullish triangle led to a mini-panic
down to SPX 5808. A Fri rebound was expected, but turned out to be
somewhat weaker than expected with the surprisingly weak jobbs report and only
12K jobs added, but the result was explained as a result of the FL hurricanes
and Boeing strike. On the positive side the Nov FOMC is next Wed/Thur due
to the Tue election, and the weak jobs report could be ammunition for a dovish
Fed and a move back to SPX 5800 which seems to align with this weeks SPX options
OI..
Last weeks volatility has moved the INT/LT indicators back to neutral, while
the ST indicators (ST Composite & VIX Calls) have moved to a weak Buy. The
VIX call indicator is somewhat unusual as sentiment is determined by a high P/C
(1.0) last seen in the 2nd half of 2021. This tends to be less bullish
than high VIX call volume so the strong Buy is downgraded to a weak Buy.
Next week is the Nov FOMC meeting on Wed/Thur due to the Tue election.
A Trump victory is likely priced in, but a dovish Fed (rate cut) seems to be
indicated by the SPX options OI with a likely move back above SPX 5800 by Fri.
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 inreased from a weak Sell, but
remains below neutral.
Update Alt EMA. Bearish sentiment has inreased from a weak Sell, but
remains 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 moved up sharply from neutral to a weak Buy.
Update EMA. Bearish sentiment moved up sharply from neutral to a weak Buy
VST (grn).
The ST VIX calls and SPXADP indicator bearish sentiment moved up very sharply
from above neutral to just below a strong Buy. Normally, VIX call Buys are
triggered by high call volume on strong advances, this one is triggered by high
put volume on declines as shown in the second chart.
The ST VIX calls and puts with ratio bearish sentiment shows that low volume
(300k) and high P/C (1.0+) can be bullish as seen in the last half of 2021, but
less so than when there is high call volume.
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 moved up sharply from near a strong Sell to
neutral.
Bonds (TNX). Bearish sentiment in bonds remains at extreme lows
even though rates have retraced almost half of their losses from the 5% high.
Rates could rise much higher if the US follows the UK example of "What debt limit,
just redefine debt."
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, INT view. Bearish sentiment has declined from a strong to weak Buy
even with a 10% correction and may decline further.
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 moved up from below a weak Sell to below
neutral in a range similar to late 2021.
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 moved up above
neutral to the area that has marked ST bottoms the last 6 mns.
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 above a strong Sell but remains near low extremes.
Fri announcement of NVDA replacing INTC in DJIA by Nov 8 could provide ST bounce.
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 moved up from a weak Sell.
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 8. 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.
With Fri close at SPX 5729, options OI for Mon is moderate.with strong put
support at 5700 and little call resistance until 5900. High BE at 5815
should provide upward bias.
Wed also has moderate SPX OI where put support rises to 5750 and call resistance
starts at 5800 and BE is 5815. With FOMC Wed/Thur, possible range is
5750-5800+.
Fri also has moderate SPX OI where put support rises to 5775-5825 (based on
straddles) and call resistance starts at 5850 and BE is 5825. There is a
good chance that a dovish FOMC results in a move to 5800-25.
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
slightly negative at -.75 SD, NQ (NDX) is at neutral at -0.5 SD, YM (DJIA) remains a weak Sell -1.0 SD. Note updates are Tue, so may be out of date.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Overall, the stock market appears in a topping
process similar to the last six months of 2021, but does not show the extreme
low bearish sentiment previously seen at a major top except in the tech sector.
ST Indicators (ST Composite & VIX calls) indicate a move back over 5800 is
probable this week with the FOMC Wed/Thur, but the hedge spread remains at very
low levels and more volatility is likely.
Weekly Trade Alert. More volatility is possible early in the week,
but a move to SPX 5800-25 looks likely by EOW. Updates @mrktsignals.
Last week showed considerable weakness intraday while volatility picked up as
predicted by the VIX call indicator. As noted under the ST Composite a
data glitch at Stockcharts produced faulty data for the week of Oct 7 and was
not corrected until the 14th which resulted in a no call for the week. The
SPX dropped about 1% for the week to 5808 with a low of 5785 Thur, but is showing
increasing support for the 5800 level as indicated in this weeks options OI.
The COT (futures) data showed a weak Sell for the DJIA (YM) and the Dow was down
about 3%, dropping every day, while the SPX was aided by strength in the NDX
with both having neutral sentiment.
The net result in last weeks volatility is an overall increase in bearishness
with the ST Composite and VIX call indicator returning to neutral.
However, The hedge spread remains very low, much like late 2021 and more
volatility is expected, but INT/LT sentiment remains only moderately bullish and
higher prices are possible until extreme bullish sentiment appears.
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 to slightly below a weak
Sell.
Update Alt EMA. Bearish sentiment reversed to slightly above a weak Sell.
The ST Composite as a ST (1-4 week) indicator includes the NYSE volume ratio
indicator (NYDNV/NYUPV & NYDNV/NYDEC) and the UVXY $ Vol/[SPX Trend, SMA only]. Weights
are 80%/20%.
Update. Bearish sentiment was reported incorrectly last week due to a data
glitch at Stockcharts.com for the entire week of Oct 7 and was not corrected
until Oct 14. The correct sentiment had declined to just above a weak Sell
and now has increased to neutral.
Update EMA. Bearish sentiment remained below neutral two weeks ago and last
week moved to above neutral.
The ST VIX calls and SPXADP indicator bearish sentiment correctly showed a
weak Sell last week and the divergence with the NYSE volume indicator resulted
in a missed call, but has now moved up strongly to well above 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 remains near a strong Sell based on strong
FOMO (call buying).
Bonds (TNX). Bearish sentiment remains at low extremes as rates
continue to creep upwards as the effects of a weakening economy battles with
strong spending and deficits (more borrowing).
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 has dropped well below a strong Buy as prices have
backed down to the 2022 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 has improved to just above a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment remains just below a weak Sell as ETF
P/Cs remain 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 increased slightly
due to higher ETF bearishness vs lower options bearishness.
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 to the strong SEll level with the drop in ETF P/Cs.
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 beyond the weak Sell due to ETF P/Cs.
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 1. A text overlay is used for extreme OI to improve readability,
P/C is not changed. Also, this week includes a look at the GDX for Dec exp.
A new addition is added for OI $ amounts with breakeven pts (BE) where
call & put $ amounts crossand $ volume.
With Fri close at SPX 5808, options OI for Mon is moderate as increased put OI
in the 5800s has pushed the BE to 5830 and high OI$. A move above 5825 is
likely.
Wed has small OI where SPX has put support at 5800 and 5750 and moderate call
resistance at 5875 and above. Positive bias to 5850+.
For Thur EOM strong SPX has large OI at 5825 and above, but strong put support
at 5800. Likely target 5800-25.
For Fri w/jobs report, moderate OI and mostly hedges between 5800-900 has a
positive bias below 5850 and negative bias above. Likely close near 5850.
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
neutral at -.5 SD, NQ (NDX) is at neutral at -0.5 SD, YM (DJIA) remains a weak Sell -1.0 SD. Note updates are Tue, so may be out of date.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. As Kamela seems to permanently have her foot stuck in her
mouth, another Trump term is becoming increasingly likely and may result in a
post-election blow off, but SPX earnings growth is becoming more questionable
and could result in a sharp reversal in SPX prices by late Jan 2025.
Weekly Trade Alert. A trading range between SPX 5800-75 looks
likely. Updates @mrktsignals.
Last week started out strong on Mon with a 1% gap open in SPX, possibly with news that
Israel would not attack Iran's oil fields aided by the continued strength of
Trump in the betting polls
and rallied to 5871 before closing at 5860. Tue saw a sharp reversal that
tested the prior Fri lows at 5800 with a dismal ESP outlook for ASML and then closed
at 5815. A more more or less SPX steady rise for the rest of the week saw
a test of the Mon highs and a new closing high at 5865. Several articles
have recently appeared in ZH questioning the reliability of the betting odds for
Trump as four very large bettors ($30M) all funded by crypto exchanges were
identified as Trump supporters that may indicate some "tit for tat" with Trumps
support for the crypto market.
Sentiment is somewhat mixed as the NYSE Adv/Dec volume is showing strong up volume
creating a ST Buy for the ST Composite even as the ST VIX call indicator drops
to a weak Sell. Most of the INT/LT indicators are showing a weak Sell.
My best guess is a continued advance into the election, but there may trouble
after. Trump has proven himself to be a consummate salesman and may be
gaming the betting odds by garnering support from the crypto market.
Sorry last week, I forgot to hit the publish button on Sat and didn't notice until
Sun AM when I added the link for NAAIM.
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 to a weak Sell.
Update Alt EMA. Bearish sentiment fell to beyond a weak Sell, mostly due to
ETF P/Cs and SPX ETFs.
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 sharply with the sell off on Tue to a weak
Buy.
Update EMA. Bearish sentiment spiked Tue to a strong Buy before retreating
to a weak Buy by EOW.
The ST VIX calls and SPXADP indicator bearish sentiment moved to a weak Sell
after a moderate increase in VIX call buying Tue/Wed fell sharply by EOW to
monthly lows.
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 continues to inch down slowly much like late
2021.
Bonds (TNX). Bearish sentiment remains at extreme lows with
rates holding over 4%.
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, using INT view. Bearish sentiment fell below a strong Buy as the HUI
at 345 rose to its highest level since the 2020 high at 370 when int rates
were 0%.
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 bearish sentiment continued to fall beyond the
weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment also fell beyond the 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.
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 was unchanged.
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 reversed back to the weak Sell+ area with the drop in ETF
P/Cs.
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 dropped to near a weak Sell with the drop in ETF
P/Cs.
III. Options Open Interest
Using Thur closing OI, remember that further out time frames are more likely
to change over time, and that closing prices are more likely to be effected.
Delta hedging may occur as reinforcement, negative when put support is broken
or positive when call resistance is exceeded. This week I will look
out thru Oct. A text overlay is used for extreme OI to improve readability,
P/C is not changed. Also, this week includes a look at the GDX for Dec exp.
A new addition is added for OI $ amounts with breakeven pts (BE) where
call & put $ amounts crossand $ volume.
With Fri close at SPX 5865, options OI for Mon is moderate with only a slight
negative bias with strong put support at 5750 and strong call resistance at 5900.
Wed has very small OI where SPX with similar support/resistance as Mon.
For Fri strong SPX OI call resistace is at 5900 with moderate put support at
5950 indicates some positive bias.
For Oct 31 EOM SPX OI is moderate where the call resistance from 5840-50 becomes
a pivot as delta hedging may provide support while above and next resistance
becomes 5900.
Currently the TLT is 93.9 with the TNX at 4.07%, there is little call resistance
until 100 and prices have fallen into put support, but ETF sentiment above may
more than offset option effect.
Using the GDX as a gold miner proxy closing at 43.2, prices have moved above
call resistance as ETF sentiment above may more than offset option effect.
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
neutral at -.25 SD, NQ (NDX) is at neutral at -0.5 SD, YM (DJIA) is
at a weak Sell -1.0 SD. Note updates are Tue, so may be out of date.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Last weeks outlook for a mild pullback proved
unsuccessful other than the 1-day pullback Tue. An additional positive ST
was that the NAAIM exposure index of active risk managers
which was expected to rise, actually fell from 90% to 82% indicating increased
bearish sentiment and more support likely into the election. COT also
showed a surprise as NQ sentiment fell from a weak Sell to neutral.
Weekly Trade Alert. Positive bias likely, but no targets. Updates @mrktsignals.
