Bulls Get the Treats This Year

Still settling in and multiple distractions keep demanding my attention.  After using my laptop the last two weeks from a hotel room, this weekend I am converting back to my desktop in a new house.  As a result the weekend post will be short with no options OI update.

After calling for a move in the SPX to 4650 in my mid-Oct Twitter update while many were calling for a move to 4000 or lower, every thing has gone the bulls way.  The biggest surprise was the "no holds barred" outcome of the rally which has all the markers of short-covering as all early day declines seem to be quickly reversed even on bad news.  With economic indicators already showing a slowing economy, a combination of supply chain issues, covid variants, and an increasingly unsupportive Fed could result in a visit by the Grinch for Xmas this year.

I. Sentiment Indicators

The INT/LT Composite indicator (outlook 3 to 6+ months) has three separate components. 1st is the SPX and ETF put-call indicators (30%), 2nd the SPX 2X ETF INT ratio (40%), and 3rd a volatility indicator (30%) which combines the options volatility ratio of the ST SPX (VIX) to the ST VIX (VVIX) with the VXX $ volume.

The INT/LT Composite sentiment indicator continues to bounce off extreme lows (Sell) with the duration and extremes greater than the Sept-Oct 2018 top, indicating a more serious correction ahead.

 

The ST Composite as a ST (1-4 week) indicator includes the NYSE volume ratio indicator (NYDNV/NYUPV & NYDNV/NYDEC) and the VXX $ Vol/SPX Trend. Weights are 80%/20%.

ST Composite sentiment reached a Sell level the prior week as seen in Apr and early Sept with Apr's Sell almost a month before the pullback.  Will supply chain problems disrupt Holiday shopping?

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.

Sentiment and conclusions are very similar that for the ST indicator.

ST sentiment is at the extreme level.

Bonds (TNX).  Bearish sentiment in bonds has bounced significantly, now at the Spring highs and could means rates are about to pull back.  (Due to economic weakness?)

For the INT outlook with LT still negative, 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.

Gild miners sentiment remains near neutral as increased ETF bearish sentiment is offset by int rate pressure with the resulting outlook as more sideways action.

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).

Sentiment continues to hover near the lows.

And the sister options Hedge Spread bearish sentiment as a ST/INT indicator (outlook 1-3 mns) has declined sharply, but the LT (blue EMA) remains near neutral with the potential for several more weeks of upside/consolidation..

Taking a look at the ETF ratio of the INT term SPX INT (2X) ETFs (outlook 2 to 4 mns) as bearish sentiment, it shows very little support for any more than ST gains.

The INT term NDX ST 3x ETFs (outlook 2 to 4 mns) bearish sentiment is now nearing the levels at the Sept top.

IV. Technical / Other

This week I wanted to take a brief look at the Combined Put-Call Revised indicator (Equity + ETF + SPX), this indicator also remains at extreme levels.

Conclusions.   Very little has changed in my INT outlook and with most sentiment meassures at or near low extremes, except hedging, the stock markets seem to be living on borrowed time.

Weekly Trade Alert.  .Sorry, not much to say this week says the trickster.  Updates @mrktsignals.

Investment Diary,  Indicator Primer,
 update 2021.07.xx  Data Mining Indicators - Update, Summer 2021 (in progress),
 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
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