Last week INT/and LT indicators were indicating that a pullback was likely
except for the ST Composite which remained at neutral. SPX options OI was
also indicating that 7725 or lower was likely, but the large SPX straddle at 8K
(~140 p&c) at the Fri AM exp convinced me that the pullback would be limited.
However, I was wrong as the week started with strong concern over rising LT
rates which rose to over 5.3%, the highest level since 2007, and the SPX fell to
the mid-7600s. Apparently, this was enough to panic the US Treasury which
on Wed announced a plan to double its purchase of bonds for the next quarter.
This in turn lit a fire in the crypto and PM markets assuming higher inflation
as the outcome, and int rates ended the week largely unchanged.
Bearish sentiment increased slightly overall with the exception of the DM/SM
indicator. Many are still expecting a move to SPX 8k before a wave 5 top,
but a larger pullback may still be in the wings for late Sept and beyond due to
tech EPS. Tech supporters are talking about the "Jevons paradox" related
to LLM token prices and usage volume as
Citadel Securities recently pointed out, the recent 40% decline in token
prices resulted in a 50% increase in usage. However, consider a farmer who
sells 100 apples for $1 with $100 in revenue, if lower quality competition
forces him to lower the price to $.60 and he sells 150 then his revenue is only
$90, or a 10% decline. With tech EPS expected to grow 30%/yr, this may not
be welcome.
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 moved up from a strong Sell but
still close.
Update Alt EMA. Bearish sentiment moved up from a strong Sell but well below
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 remained above neutral.
Update EMA. Bearish sentiment remained above neutral.
The ST VIX calls and SPXADP indicator bearish sentiment reversed strongly to
neutral with strong VIX call buying on up days.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (52%)
and includes ST Composite (12%) and three options FOMO indicators using SPX (12%),
ETF (12%), and Equity (12%) calls compared to the NY ADV/DEC issues (inverted). FOMO
is shown when strong call volume is combined with strong NY ADV/DEC. See
Investment Diary
addition for full discussion.
Update EMA. Bearish sentiment remains near a strong Sell VST (grn).
Update FOMO calls. Bearish sentiment reversed back above a strong Sell.
Bonds (TNX). Bearish sentiment sentiment remains at low extremes.
After the pullback in rates after the US Treasury buyback announcement, rates
ended at a new high for the month on Friday.
For the INT outlook, the gold miners (HUI) bearish
sentiment is presented in a new format using the data mining software to add
the inverse TNX rate to the ETF ratio.
Update. Bearish sentiment remains near a weak Sell, while the recent rally
seems to be more from US economic weakness and the Treasury buyback which
weakened the US$ by about 3% over the last month.
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 continues to fall into a deeper strong Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment is largely unchanged at 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 below a weak
Sell as the 2X ETF sentiment continues to fall and may reach a strong Sell as in
late 2021 before a major top.
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 mid-way between a weak and strong 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 remains at a strong 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 Aug 28 & EOM. 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 7674, options OI for Mon is moderate with a BE at 7700 due
to a fairly large put position. Prices could rise toward 7700.
Wed has small SPX OI with a lower BE at 7690 due to a large call position at
7650 offset by puts at 7700 and 7750. SPX 7650-7700 is likely.
For Fri moderate SPX OI has a BE also at 7700 that could keep prices in the
7650-7700 area, but clear support/resistance is 7550/7800. With NVDA EPS
after close and PCE in AM, there is much room for volatility.
For Mon EOM moderate/strong SPX OI has a BE at 7620, but here also straddles
between 7600 and 7750 can indicate a wide range.
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 dropped
below
a weak Sell at -0.6 SD, NQ (NDX) dropped to neutral at +0.0 SD, YM (DJIA) remains a weak Sell at -1.5 SD.
A quick look at gold (GC), bearish sentiment is in-between a weak and strong Sell at -1.6 SD.
Conclusions. Much of what happens next week will be determined by
the monthly PCE inflation data in the AM and NVDAs EPS in the PM Wed 26th.
I have little guidance to give but there seems to be a pattern with NVDA stock
price as NVDA stock price seems to decline before a positive surprise and rally
before a negative outlook and the current price is down 5% last week and 10%
from an ATH. Jevons paradox would predict strong demand for the LLM
GPUs.
Weekly Trade Alert. No price guidance. Updates @mrktsignals.
US stocks continue to follow the post 2000 Mar-May 40% crash of the NDX with
a strong 5-7 day rally followed by an upward biased consolidation. The SPX
was the prime example last week with a low of 7717, a high of 7817 and a close
at 7786 for a gain of 28pts. The slightly weaker jobs data from the prior
week , flat CPI and weak UMich sentiment all support little/no change by the Fed
mid-Sept with a continued upward bias for the stock market. In the
meantime the low volatility crawl higher is sending bearish sentiment tumbling
with the exception of the ST Composite and Hedge Spread and is a warning of
INT/LT problems ahead.
Last week saw a significant move lower in bearish sentiment although still
not as extreme as before the 2020 and 2022 downturns. The INT/LT, ST/INT
Composites and DM/SM showed ST and INT EMAs reach the strong Sell levels, while
the ST Composite remains above neutral and the Hedge Spread reached a weak Sell.
The VIX call indicator is just short of a weak Sell, while the FOMO call
indicator did reach a strong Sell. Strong ETF call buying pushed the SPX
2X ETF and ETF options indicator to a strong Sell while the NDX 3X ETF and ETF
options indicator moved to a weak Sell.
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 from a weak Sell to just
above a strong Sell based on strong ETF call buying.
Update Alt EMA. Bearish sentiment continued to fall with ST & INT (grn, red)
at strong Sells similar to late 2019.
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 just above a neutral.
Update EMA. Bearish sentiment dropped toward neutral.
The ST VIX calls and SPXADP indicator bearish sentiment moved closer to a
weak Sell.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (52%)
and includes ST Composite (12%) and three options FOMO indicators using SPX (12%),
ETF (12%), and Equity (12%) calls compared to the NY ADV/DEC issues (inverted). FOMO
is shown when strong call volume is combined with strong NY ADV/DEC. See
Investment Diary
addition for full discussion.
Update EMA. Bearish sentiment continued to drop to a strong Sell INT (red).
Update FOMO calls. Bearish sentiment fell to a strong Sell.
Bonds (TNX). Bearish sentiment remains at low extremes as rates
hold around the 4.75% 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 remains at a weak Sell as prices seem to be held
up by a weak US $.
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 dropped sharply to a strong Sell ST (grn) and INT
(red).
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment remains at the weak Sell level as
moderate hedging continues.
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 turned down as the
2X ETF sentiment dropped below a weak Sell.
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 dropped well below a weak Sell toward a strong Sell based
on 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 the lowest level in several years on a
combination of ETF P/Cs and 2X ETFs.
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 Aug 21. 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 7786, options OI for Mon is moderate with strong call
resistance at 7850, but little put support until 7700. Minor pullback is
likely.
Wed has small SPX OI with ITM calls at a 7725 straddle offset by ITM puts at 8k.
May remain in mid-7700s.
For Fri AM strong SPX OI has BE at 7745, but a huge straddle at 8k could keep
prices near current levels.
For Fri PM moderate SPX OI shows little put support until 7685 and a late
selloff below 7750 looks likely.
For Mon EOM moderate SPX OI shows a similar setup to Fri PM with call resistance
down to the BE at 7625, but put support is likely to be added on a drop to 7700.
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 to near
a weak Sell at -0.8 SD, NQ (NDX) increased to a weak Buy at +1.0 SD, YM (DJIA) remains a weak Sell at -1.5 SD.
A quick look at gold (GC), bearish sentiment is in-between a weak and strong Sell at -1.5 SD.
Click dropdown list to select from the following options:
Tech / Other History
2026
2025
2024
2023
2022
Other Indicators
Conclusions. Both sides of the US/Iran war seem to be content seem
to be content to play a "game of chicken" to see which one caves first, but
Trump seems to have the weaker hand with many of the senior GOP congressmen
worried about mid-term election results. Another potential problem that
does not seem to be getting enough attention is the US
strategic oil reserve levels that
have fallen from over 400M bbls to under 300M bbls the last 4 mns. What
happens when the operational limit of 250M bbls is reached?
Weekly Trade Alert. The SPX is expected to stay around the
7750-7800 through early Fri, but may retreat to 7700 or lower afterwards thru
the EOM. Updates @mrktsignals.
Last week was expected to see a strong rally in techs based on comparison of
the S.Korean KOPSI 40% plus crash to the early 2000 NDX 40% crash, but again
Trumps assertion that a deal with Iran was imminent sent stocks exploding higher
and oil prices dropping sharply. Instead of the 50-67% recovery expected
for techs in the ST, the NDX gained 70% of it loss from 30.8k to 27.2k to just
below 30k and the SPX continued its rally from the recent low near 7300 to just
below 7800. The latest "deal" tentatively reached between Iran and Oman,
who share the Strait of Hormuz, allows for the reopening of the strait with a
shared fee for passage and refuses passage to the US and Saudi Arabia.
This sounds a lot like one of Trumps proposals where an 80% tariff is announced
only to later to accept a 40% tariff, ie, keep the fee for passage, but allow US
and SA passage. Only time will tell.
Back in April, I noted the
comparison of the extreme low NY ADV/Dec volume of this years rally to 2018 and
indicated that a similar time period would indicated a top about 6 mns later
which would be Oct, similar to the mid-Sept outlook last week. This weeks
Tech/Other updates that outlook, including a potential expanding wedge that
could indicate an SPX move to 6300 or lower. The likely culprit
would be falling profits in the AI sector as measured by the
LLM Token Expenditures Index
(article) by
Silicon Data (X
updates). The last quarters EPS included record token cost, while next
quarter EPS will show a sharp drop.
The sharp move up last week moved most of the INT sentiment indicators have
moved to a weak Sell, particularly those effected by the ETF P/C which saw a
sharp decline last week. This includes the INT/LT Composite, ST/INT
Composite, Hedge Spread, and SPX 2X ETFs & ETF options indicators.
EMA sentiment for the INT/LT Composite, ST/INT Composite VST reached a strong
Sell which may mean a pullback to SPX 7600 as indicated by the SPX options OI
before a move up to a Sept high. The ST Composite remains positive, but
below a weak Buy.
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 from above neutral to a weak
Sell.
Update Alt EMA. Bearish sentiment dropped sharply with the VST (grn) now at
a strong Sell and the INT/LT a weak Sell similar to the June top.
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 dropped further from a weak Buy.
Update EMA. Bearish sentiment remains halfway between neutral and a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment dropped further below neutral,
but short of a weak Sell.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (52%)
and includes ST Composite (12%) and three options FOMO indicators using SPX (12%),
ETF (12%), and Equity (12%) calls compared to the NY ADV/DEC issues (inverted). FOMO
is shown when strong call volume is combined with strong NY ADV/DEC. See
Investment Diary
addition for full discussion.
Update EMA. Bearish sentiment dropped sharply from just below neutral to a
weak Sell INT/LT and a strong Sell VST (grn).
Update FOMO calls. Bearish sentiment dropped back to recent lows below a
weak Sell.
Bonds (TNX). Bearish sentiment dropped further at a strong Sell
although rates remain above the 4.5% breakout.
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 dropped back to a weak Sell as the HUI appears to
be in a 4th wave correction similar to the move from 700 to 850.
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 dropped from a weak Sell to halfway to a strong
Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment dropped sharply from above neutral due a
drop in ETF P/C ratio to a weak Sell VST (grn).
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 toward
neutral with a spike in options volume.
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 near a weak Buy on a collapse in ETF
P/C toward 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 also reversed sharply, reaching 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 Aug 14. 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 7758, options OI for Mon is moderate with call resistance
down to 7675 and a BE at 7610. A pullback toward 7700 is possible.
Wed SPX has small OI with strong put support at 7650 and BE at 7615.
For Fri SPX has moderate/strong OI wit large ITM calls at 7550 and 7575 and a BE
at 7575 but little bias between 7550 and 7750. Expected target is 7625-75.
For Fri Aug 21 PM moderate SPX OI shows strong put support at 7520-25.
The LLM Token Index shows a moving avg (21 day) of the prices charged for AI
usage by token (see main article above for discussion). Red
represents the cost for US OpenAI, ChatGP and Claude models, while green are the
lower cost Chinese open models which are driving down overall cost to users (but
lower profits to suppliers). Result could be wider usage (good for
hardware - NVDA, but bad for hyperscalers & others). Aug 5 update.
A repeat of the 2018 analog for extremely low NY Adv/Dec volume could
result in a similar expanding wedge due to the turnaround in the AI token profit cycle.
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 remains
near neutral at -0.35 SD, NQ (NDX) reversed from below to above
neutral at +0.5 SD, YM (DJIA) remains a weak Sell at -1.35 SD.
A quick look at gold (GC), bearish sentiment is in-between a weak and strong Sell at -1.5 SD.
Click dropdown list to select from the following options:
Tech / Other History
2026
2025
2024
2023
2022
Other Indicators
Conclusions. Since early March (4 mns ago) Trump has announced that
the war with Iran was essentialy over a total of 32 times according to
NBC News,
but yet no final deal has been agreed on. It is very possible that we see
a continued rinse and repeat thru the election if oil prices stay in the $75-80
range (WTC/bbl). Last weeks SPX OI did not work out (trading range), but
tech recovery followed much as the 2000 NDX crash outlined.
Weekly Trade Alert. SPX OI indicates a potential pullback to about
the 7600 area over the next couple of weeks, but 2000 analog suggests a 7700+
floor. Updates @mrktsignals.
