Last week was a good week for a vacation as the only significant action was
Mon AM's move to SPX 4550 with the rest of the week closings only about 10 pis
above or below. The gap fill at 4600 (act 4580) is only a few pts away and
may be reached before any pullback. Bearish sentiment remains mostly
unchanged so an INT/LT top is not expected. Fri economic release of the
Nov "flash" PMIs did show strength as mentioned last week's outlook for a
cyclical recovery with services (70% GDP) strong while manufacturing (15% GDP)
was weak. As a result the DJIA was up and NDX was down with higher TNX
rates, and the SPX up slightly. A recovery coud lead to a trading range of
several hundred pts thru mid 2024, perhaps SPX 4250-4650.
Economic data for the week includes Q3 GDP 1st release and is expected
at a 4.9% growth rate and Thur OCT PCE inflation that is expected to moderate.
NFP is the following 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. Bearish sentiment Is just below neutral with volatility measures
the weakest and SPX ETFs the strongest.
Update Alt EMA. Bearish sentiment 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. Weights
are 80%/20%.
Update. Bearish sentiment has reached the weak Sell level and now supports
the bearish outlook of the VIX & SPXADP indicator.
Update EMA. Bearish sentiment is increasing, but not enough to warrant more
than a 2-3% pullback.
The ST VIX calls and SPXADP indicator bearish sentiment took a nosedive last
week and is nearing a srong Sell.
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 reversed last weeks weak Sell level, any
pullback should only be ST.
Bonds (TNX). Bearish sentiment continues lower at the strong
Sell level.
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.
Update. Bearish sentiment continues to fall sharply, now with the ETFs at
neutral, probably due to hopes of Fed easing.
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 fell sharply and continues to resemble early 2021.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment joined the ST indicators at the weak
Sell level.
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 dipped below
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 continues to decline below the weak Sell level with
weakness from both NDX ETFs and 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 is more bullish than for NDX.
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
Dec 1. 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 4559, options OI for Mon is moderate with put support
starting at 4525 and only minor call resistance above 4550. ITM calls
could be a negative, and some pullback is possible.
Wed has very small OI where SPX has support between 4500 and 4550.
For Thur EOM strong SPX OI shows stronger resistance from 4550-4600 and the
straddle at 4500 looks like a likely target.
For Fri put support is somewhat stronger and may keep prices over SPX 4500 .
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 Neuttral at +0 SD, YM (DJIA) is a strong Buy at +2.5 SD, Dow theory
may support DJIA thru EOY.
Click dropdown list to select from the following options:
Tech / Other History
2023
2022
Other Indicators
Conclusions. ST sentiment continues to support a pullback of 2-3%
(SPX 4400-4450) but the Aug gap at 4580 may need to be filled first. VST
BF sales will probably determine which target is met first.
Weekly Trade Alert. SPX options OI shows Mon as the most likely
time for a final thrust higher, while Wed-Thur look like the best time for a ST
pullback.. Updates @mrktsignals.
A strong start to the week was expected last week with favorable inflation
(CPI), but was much stronger than expected with an SPX 100 pt romp to 4500 on
Tue. The late pullback never materialized with the rest of the week spent
bouncing around 4500. Forgive last weeks double negative which should have
said "Don't be surprised if the SPX fills the gap at 4600 by Dec/Jan". A
lower gap fill at SPX 4400 still looks more likely first, however. Oil and bonds
continued to support the SPX with rates remaining in a tight range around 4.5%
and oil dropping below $75/bbl before a late recovery.
Overall sentiment is supportive of a cyclical recovery in 2024 (stronger GDP
and higher int rates) with large bearish sentiment for the DJIA (COT) and low
bearish sentiment for the NDX (ETFs and options) and bonds (TBT/TLT). In
addition the Teflon man (Trump) is looking more likely to resume the presidency
and there is talk already beginning to extend (or make permanent) the Tax Cuts and Jobs Act
of 2019 set to expire in 2025 which will increase the deficit and pressure bonds
even more.
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. Bearish sentiment declined to neutral.
Update Alt EMA. Bearish sentiment is just 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. Weights
are 80%/20%.
Update. Bearish sentiment fell during the week but bounced to end above neutral.
Update EMA. Bearish sentiment fell during the week but bounced to end above
neutral.
The ST VIX calls and SPXADP indicator bearish sentiment moved toward neutral
from the weak Sell last week.
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 fell sharply last week with a sharp drop
in hedging to about the weak Sell level.
Bonds (TNX). Bearish sentiment remains at the strong Sell level,
but it remained there for much of 2020 before rates rose.
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.
Update. Bearish sentiment fell below neutral as the Hui remains in a tight
range around 220.
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 fell sharply to the weak Sell level.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment has been the strongest supporter of
higher prices since mid-Oct, but has now fallen back toward neutral.
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 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 has fallen sharply to below the weak Sell based on weaker
NDX ETF and ETF option sentiment pointing to a possible Black Friday
disappointment.
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 is more bullish than for NDX and now at neutral.
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 18 & EOM. 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 cross.
With Fri close at SPX 4515, options OI for Mon is moderate with put support at
4450 and call resistance at 4480.
Wed has somewhat smaller OI where SPX has strong put support at 4450.
For Fri moderate SPX OI shows significantly higher call resistance down to 4450,
some some weakness is expected.
For EOM strong SPX OI shows call resistance down to the 4400 level and lower.
Using the GDX as a gold miner proxy closing at 28.4, moderate put support at
current levels may keep prices in a tight range.
Currently the TLT is 90 with the TNX at 4.44%, sentiment is somewhat reversed
with calls at lower prices and puts above, but BE at current levels may also
keep prices in a tight 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 is neutral at
+ .25 SD, NQ (NDX) is Neutral at +0 SD, YM (DJIA) is a strong Buy at +2.5 SD, Dow theory
may support DJIA thru EOY.
Click dropdown list to select from the following options:
Tech / Other History
2023
2022
Other Indicators
Conclusions. I was one of the few calling for higher prices from
the Oct lows, but the vertical nature of the rally was surprising, likely due to
the blindsiding of the bears. Currently there is no indication of an
immediate reversal, other than a ST pullback. My LT outlook remains for a
major top late 2024, possibly near the Nov election..
Weekly Trade Alert. Last week never saw the expected pullback as
prices were supported by lower int rates and oil prices. The best oppty
for a pullback looks to be post Thanksgiving if BF sales disappoint for techs
with possible targets of SPX 4450 Fri and 4400 EOM. Updates @mrktsignals.
Prices continued to push higher last week even though some ST sentiment and
options Oi indicated a possible pullback, with the SPX closing over 4400 at 4415.
Probably the most important development was the continued drop in oil prices
into the $75-80/bbl range. Several weeks ago, I mentioned the dependence of
stock prices on int rates (TNX), while int rates were dependent in the ST on oil
prices. Now a drop in oil to $75-80/bbl means lower inflation pressures
for the next few months and will help a continued stock advance. Next Tue is
the CPI report which is expected to drop from 3.7% to 3.3% YOY while the core
rate is expected to remain near 4%. The core rate is effected heavily by
shelter (rent) cost which some argue with its relevance since it is lagged, but
since most rentals are 1 year leases and prices only go into effect at the
lease-end, the 12 month MA seems appropriate.
Surprisingly sentiment has actually improved over the last two weeks as the
rally is not seen as sustainable, and bearish sentiment has increased with the
ST composite now at a weak Buy and the Hedge Spread is near a strong Buy.
I was expecting weakness thru the EOY based on the int rate outlook (TBT/TLT),
but the drop in oil prices will likely offset the negative effects ST. Do
not be surprised if we don't see a gap fill at SPX 4600 by Dec/Jan.
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. Bearish sentiment improved slightly, but remains near neutral.
Update Alt EMA. Bearish sentiment improved slightly.
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. Weights
are 80%/20%.
Update. Bearish sentiment improved from neutral to near a weak Buy.
Update EMA. Bearish sentiment (ST, grn) improved from near a weak Sell to
near a strong Buy, and likely means a positive options exp week ahead.
The ST VIX calls and SPXADP indicator bearish sentiment increased to more
bearish, but remains near a week Sell. This may mean a short but sharp
pullback ahead, possibly after Thanksgiving if Black Friday sales are weak.
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 increased from a weak Sell to a weak Buy with
a sharp turnaround in hedging.
Bonds (TNX). Bearish sentiment remains near a strong Sell as the
expected range of 4.5-5.0% continues to hold.
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.
Update. Bearish sentiment declined to below neutral even as prices fell 8%
last week.
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 fell further below neutral, but prices could
continue to rally as seen for all of 2021.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose sharoly to near a strong Buy after
last weeks neutral reading.
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 continued to rise
aided by options sentiment.
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 sharply as ETF options and NDX ETF sentiment both
dropped and may indicates some weakness ahead, possibly from disappointing Black
Friday sales.
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 is more bullish than for NDX and remains above
neutral.
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 17. 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 4415, options OI for Mon is moderate with call resistance
at & over 4400, but may not be enough to counter momentum and put support is
around 4325.
Wed has very small OI where SPX has callr resistance over 4375 and put support.at
4300
For Fri opt exp AM strong call resistance at SPX 4450 will likely stop any rally
and lesser resistance at 4400 may push prices down to that level..
For Fri opt exp PM moderate SPX OI shows a potential target of 4350-4400 if 4400
is broken.
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
+ 0 SD, NQ (NDX) is Neuttral at +0 SD, YM (DJIA) is a strong Buy at +2.5 SD, Dow theory
may support DJIA thru EOY.
Click dropdown list to select from the following options:
Tech / Other History
2023
2022
Other Indicators
Conclusions. Everyone is talking about the Zweig breadth thrust of
the last two weeks as a bullish indicator and combined with the sentiment
outlook it is likely that the INT low expected in late 2023 around SPX 4150 was
seen at the Oct lows at 4100 as lower oil prices have reduced the ST outlook for
higher int rates.
Weekly Trade Alert. A strong start to the week looks likely to
about SPX 4450, but a pullback to 4400 or lower is indicated by EOW using the
SPX options OI. Updates @mrktsignals.
