Last weeks outlook was about as good as possible without a crystal ball.
The SPX was expected to hang around 6K for couple days then decline to 5900-50
into the Fri AM optn exp with lower prices in the PM if the drop occurred.
In fact, the SPX flirted with 6K thru mid-day Wed before turning down with late
day selloffs as predicted by the futures (COT) with a Thur close at 5950.
Fri began with a gap down to 5913 and continued to slide to a PM low at 5853
before a late recovery. Surprisingly, the decline of over 2.5% did little
to improve sentiment which in some cases became more bearish (hedge spread, NQ
futures).
Next week is expected to see a weak bounce based on SPX options Oi, but the
ST indicators (ST composite and VIX calls remain neutral) and a move back below
5900 is expected by the EOM. There was an interesting article by
Tom DeMark on MW Fri where he sees similarities to 1929, but still expects the DJIA
to reach the 47K level and SPX 6150, possibly near the inauguration late Jan
2025. Current price action in the techs relative to the DJIA remains
reminiscent to 2000 where the DJIA remained between 10k to 11k all year while
weakness pervaded the techs.
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 to near a weak
Sell.
Update Alt EMA. Bearish sentiment declined slightly to near 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 is essentially unchanged.
Update EMA. Bearish sentiment is essentially unchanged.
The ST VIX calls and SPXADP indicator bearish sentiment is little changed.
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 at a weak Sell due to the low Hedge
Spread.
Bonds (TNX). Bearish sentiment remains at low extremes, but
improved slightly as rates approach the 4.5% level.
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 continued to dive with low DUST volume, even as
gold stocks approach the bear market mark of down 20%.
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 declined slightly, reaching the weak Sell level.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment reversed sharply with the post-election
rally, now approaching a strong 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.
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 slightly
positive.
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 was understated in last week';s update as I missed the
reverse 5-1 SQQQ split on Thur and only got to a weak Sell before declining with
last weeks decline (BTFD effect still too strong).
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 to a weak Sell with low 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 22. A text overlay is used for extreme OI to improve readability,
P/C is not changed. Also, this week includes a look at the TLT & GDX for Dec exp.
A new addition is added for OI $ amounts with breakeven pts (BE) where
call & put $ amounts cross.
With Fri close at SPX 5871, options OI for Mon is moderate with a strong bearish
bias over 5900. Target is 5900-50.
Wed has somewhat smaller SPX OI where SPX has stronger put support at lower
levels and should maintain 5900+ if reached.
For Fri SPX gas moderate OI with a large straddle that may have a positive bias.
For Fri Nov 29 EOM strong SPX OI with a strong bullish bias that should push
prices back below 5900 toward 5850.
Using the GDX as a gold miner proxy closing at 35.5 has declined to strong put
support, but as this contradicts the HUI ETF sentiment, lower prices are
possible.
Currently the TLT is 90.1 with the TNX at 4.43%, TLT has declined to strong put
support that may support prices and keep TNX from rising over 4.5%.
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
at a weak Sell at -0.85 SD, NQ (NDX) is at weak Sell at -1.25 SD, YM (DJIA) remains a weak Sell -1.25 SD.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Weakness in the monthly options exp undoubtedly
surprised many of the bulls, but seemed to do little to change sentiment as
signs of FOMO continued in indicators such as the hedge spread (ETF P/Cs) and
NDX futures. Typically, the high volume at options exp is a sign of
accumulation/distribution with Fri at 150% of avg and leads to a reversal, but
the EOM options Oi is much like Fri so a retest of the lows is expected by EOM.
Weekly Trade Alert. A move to SPX 5900-50 is expected next week,
but is not expected to be a change in trend (b-wave). Updates @mrktsignals.
Last week was expected to see some volatility (lower prices) to start the
week with a move back over SPX 5800 by the EOW. Mon SPX opened flat before
making a new ST low below 5700 and closed with a loss. After that the SPX
exploded higher with a +50 pt gap Tue, election day, and a +100 pt gap Wed with
the announcement of a Trump victory O/N. Powell continued to contribute to
the party with 0.25% rate cut Thur and Friday SPX reached the magic 6000 mark.
Over SPX 5800 turned out to be a massive understatement as I expected that much
of the Trump celebration was already in the market.
The ST Buys for the ST Composite and VIX call indicator turned out to be
prescient, but both have retreated to neutral. Most of the sentiment
indicators show lower bearish sentiment but nothing to indicate that an INT top
is near. The COT does show, however, the SPX, NDX and DJIA futures are all
now at weak Sells which may mean late day and O/N weakness. This is
monthly options exp week and the $OI ITM call spread is huge over the put
$OI and some pullback is likely by EOW.
I. Sentiment Indicators
The INT/LT Composite indicator (outlook 3 to 6+ months) has three separate
components. Starting Aug 26, 2023 SPX options are removed due to extreme 0DTE volume
distortions. New weights are ETF put-call indicator (30%), SPX 2X ETF INT
ratio (40%), and 3rd a volatility indicator (30%) which combines the options
volatility spread of the ST SPX (VIX) to the ST VIX (VVIX) with the UVXY $ volume.
Update Alt, INT view. Bearish sentiment remains near neutral.
Update Alt EMA. Bearish sentiment declined slightly but remains near neutral.
The ST Composite as a ST (1-4 week) indicator includes the NYSE volume ratio
indicator (NYDNV/NYUPV & NYDNV/NYDEC) and the UVXY $ Vol/[SPX Trend, SMA only]. Weights
are 80%/20%.
Update. Bearish sentiment fell sharply from a weak Buy back to neutral.
Update EMA. Bearish sentiment VST (grn) declined mid-week, but bounced back
EOW.
The ST VIX calls and SPXADP indicator bearish sentiment fell sharply from a
weak Buy to just 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 had reached neutral but strong call buying
(FOMO) pushed this indicator to a weak Sell.
Bonds (TNX). Bearish sentiment remains at low extremes as rates
bounced over 4.4% shortly after the election, then pulled back to 4.3%.
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 took a nosedive as volume in DUST has dried up
after a reverse 10-1 split over a week ago and has dropped from a weak Buy to
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 has moved back to near a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment reversed sharply last week from below
neutral back to a weak Sell. as the volume in ETF puts rose to twice the
historical average
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 slightly
positive.
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 sharply from a strong Sell to just below neutral
as ETF P/Cs rose sharply.
For the SPX combining the hybrid ETF options plus SPX 2X ETF (outlook 2 to 4 mns)
produces an indicator where, in this case, ETF options are a proxy for the SPY options.
Bearish sentiment for SPX rose from a weak Sell to near neutral as ETF P/Cs
rose.
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 15. 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 5996, options OI for Mon is moderate with a large
dominance of ITM calls and resistance levels at 5950 and 6075.
Wed has small SPX OI with strong call resistance at 6000 and is more likely to
see a reversal lower with put support at 5900.
For Fri AM strong SPX OI with call resistance down to 5850-5900 may see a
pullback to the 5900-50 area.
For Fri PM SPX OI is moderate and even more call dominated with put support at
5850, and could support a move below 5900 if the SPX sees the AM lower range.
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) sentiment is
at a weak Sell at -1.0 SD, NQ (NDX) is at weak Sell at -1.0 SD, YM (DJIA) remains a weak Sell -1.25 SD.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. The biggest surprise last week was the magnitude of
the reaction to the US election results. A Trump victory seemed almost
assured given the numerous gaffes by Harris and the Dems in the final days of
the campaigns, but the margin of victory and the sweeping of both Houses were a
surprise. Control of Congress should allow Trump to make many of the
sweeping changes he has promised, but the warnings of Musk before the election
and the actions of Warren Buffet (biggest selling spree in decades) indicate the
likelihood of pain before gain. However, the honeymoon may last into Jan
2025 or longer, so patience is advised before becoming bearish.
Weekly Trade Alert. The SPX may spend a couple of days playing
around 6k, but a small pullback to 5900-50 is expected by EOW. Updates @mrktsignals.
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.
