Last week was mostly a yawner with a small trading range from a low Tue PM at
5203 and a high Thur at 5265. However, last weeks call for weakness
Mon-Tue to the SPX 5200 or lower area before a move toward the 5250 area
Wed-Thur was almost perfect, but most of the downside was late Tue and most of
the upside was late Wed with the late fade Thur as expected. Next week we
have two or three Fed speakers everyday that are likely to keep prices in a
tight range. Payroll data comes out Fri that is expected to show a drop in
jobs added to 200k, but also a drop in the unemployment rate to 3.8% and slower wage
growth. If it comes out as expected, there will be no change for the Feds
outlook until Mar inflation data due mid-Apr.
ST indicators, ST Composite and Vix Call & SPXADP, have moved to a weak
Sell,.while some of the INT/LT have moved to a more positive sentiment level
with the HedgeSpread near a strong Buy. So some downside is likely, but no
major change in direction just yet.
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 pushed into positive led by the ETF
puts&calls.
Update Alt EMA. Bearish sentiment pushed into positive led by the ETF
puts&calls.
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 below neutral.
Update EMA. Bearish sentiment fell sharply led by the NYUPV/NYDNV as DNV has
dried up, resulting in the VST (grn) EMA indicator dropping midway between weak and
strong Sells.
The ST VIX calls and SPXADP indicator bearish sentiment fell sharply to the
weak Sell area.
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 back to neutral.
Bonds (TNX). Bearish sentiment continues to reach lower extremes
as rates remain over 4%.
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 remains just below neutral. The move over
HUI 240 invalidated triangle resistance and now appears to be an extended flat
between 200 and 250.
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 little unchanged near the weak Sell area.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment fell then rose again Thur with another
spike in ETF put/call ratio with VST near a strong Buy. As in late 2022
and 2023, this can continue for a while and SPX can even move lower before a
rally.
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 near a
weak Sell as the second two components fell.
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 to positive based on the ETF put/call component.
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 to near a weak Buy with the increase in ETF
put/calls.
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 Apr 5. 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 4554, options OI for Mon is moderate with some upside
possible to test the 5265 area due to straddle at 5300, but close likely around
5250-60 .
Wed has smaller OI where SPX call resistance from 5250-300 could push prices tp
5200-50 put support.
For Fri jobs data stronger SPX OI shows a slight negative bias toward the
5200-5250 area.
For EOM strong .
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
remained flat at
a weak Buy of + 1.25 SD, NQ (NDX) remained Neutral at 0.0 SD, YM (DJIA) is a
moderate
Sell at -1.75 SD, Dow theory no longer supports DJIA.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Everything seems to going as expected in support of
an INT pickup inflationm the major question remaining is what will the Fed do.
Gold in particular seems to be acting as if the Fed does nothing and the 1970s
are just ahead. Oil prices have also been increasing with WTI closing over
$83 and AAA is now forecasting gas prices of $4/gal. My outlook continues
to be that the Feds hand will be forced by a move up in bond int rates (TNX) as
supported by TBT/TLT sentiment. Currently, TNX
MAs are converging at 4.2% similar to late 2021 and mid-2023 which lasted several months before a
prolonged move up, so this summer could be critical.
Weekly Trade Alert. SPX options indicates a possible retest of last
weeks highs before any downside with a likely range of 5200-5250. No
definite timing unlike last week. Updates @mrktsignals.
Last weeks call for a rally into the FOMC based on the ST Composite
(capitulation volume) worked out well and even surpassed expectations (SPX 5200
possible) with an intraday high of 5261. J. Powell is becoming somewhat of
a conundrum as his speeches, since the "pivot" last Nov, have seemed like
"happy talk" that were later talked down by other voting members of the FOMC.
Remember that he was a career attorney and investment banker before joining the
Fed as chairman, while other FOMC members are career economists, and I feel that
he is trying to be like Alan Greenspan who used obfuscation (confusing language) to be
noncommittal, while Powell lacks the economic knowhow. Next week we get
several other FOMC members speaking, so we will see if the recent pattern
continues.
Surprisingly with last weeks explosion higher, rather than clearing out the
shorts, there was an explosion in put buying, especially in ETFs, that has
turned several of the INT indicators bullish. The hedge spread VST
actually reached the strong Buy level as the ETF put/call jumped to 2.4 on Fri,
the highest since Oct 11, 2023 when the SPX was in the 4300s and the SPX was
down 300 pts from the July high. The INT/LT Composite is looking a lot
like it did in early 2021 with a year and over 600 pts before the Jan 2022 top,
and a similar run could take the SPX to about 6000. The ETF put buying
could be due to some bearish calls by some of the EW analysts, for example,
Dr Shure (no J/S)
is expecting a wave-3 Mar top in NDX, followed by a wave-4 decline of about 10%
in Apr. This was similar to my outlook before the jump in bearish option
sentiment which now is likely to limit the downside.
Next weeks market moving news besides the Fed speakers is the revised 2023 Q4
GDP on Wed and PCE inflation Good Fri AM (both expected unchanged) with probably
more "happy talk" from Powell in the PM if PCE is bad. Note, intros to ZH
prem can be read using Chrome "reading mode".
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 from a weak Sell toward neutral.
Update Alt EMA. Bearish sentiment jumped all the way from a weak Sell to
neutral (VST).
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 EMA. Bearish sentiment dropped sharply back toward the weak Sell
level.
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 improved significantly aided by the Hedge
Spread and remains similar to the last half of 2021.
Bonds (TNX). Bearish sentiment continues to retreat, now lower
than in 2020 with rates 4% higher.
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 sharply as gold exploded higher with Powells
"happy talk", but the HUI remains stuck in a range.
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 at the weak Sell level.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment exploded higher Fri with a huge jump in
ETF put buying with the VST (grn) at a strong Buy and INT (red) at a weak Buy
and probably means any pullback will be limited to 5000+.
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 at the
weak Sell level.
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 jumped sharply as ETF put/call ratios rose and is between
neutral and 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 rose to just below 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 Mar 28. 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 & TLT for Apr exp.
A new addition is added for OI $ amounts with breakeven pts (BE) where
call & put $ amounts cross.
With Fri close at SPX 5234, options OI for Mon is moderate with the potentail
for a drop below 5200, but strong put support starting at 5150.
Wed has smaller OI where SPX has put suooort up to 5250, so any Mon losses
could be reversed.
For Thur EOM/closed Good Friday strong SPX OI shows put support up
to 5200 and call resistance at 5225 & over. The straddle at 5000 is so far
OTM that it may have little effect.
Using the GDX as a gold miner proxy closing at 29.6, strong call resistance 30
can make a rally difficult, and put support is at 28.
Currently the TLT is 94 with the TNX at 4.22%, prices could go higher with 93-5
the most likely range where strong put support is at 90 and call resistance at
98.
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
remained flat at
a weak Buy of + 1.25 SD, NQ (NDX) remained Neutral at -0.5 SD, YM (DJIA) is a
moderate
Sell at -1.5 SD, Dow theory no longer supports DJIA.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. What are the limits of AI? J.Mauldin this week
makes an interesting observation that most are overlooking the energy
intensiveness of using the AI supercomputer chips. I asked "Ask AI" (which
research showed to be a non-profit Israeli firm) for more data and found that
over the last 10 years AI energy usage has doubled every 3-4 months (Moores law)
and extraplolating, in 5 years will be using about 90% of the worlds current
energy production. What will that do to the green movement?
Weekly Trade Alert. SPX could drop below 5200 Mon-Tue, but are
likely to bounce back toward 5250 Wed-Thur. Some weakness late Thur is
possible before Fri PCE. Updates @mrktsignals.
The Mon aft update showed increased SPX OI put support at/above 5100 and even though
Tue CPI came in hotter than expected at 0.4% for Feb, same as Jan, the markets
rallied strongly, led by the NDX. Prices were already up prior to the
announcement with techs leading the way when BOJ (Japan CB) did not raise rates
from -0.1% after being negative since 2016. However, a couple of days
later Japans labor unions, which all apparently negotiate at the same time every
year, announced the largest wage gains in 30 years at 5+%. Now the BOJ is
expected to raise rates any time between now and mid-Apr. This could roil
markets due to the effect of the yen carry trade. Why is that important? I
asked "Ask AI"
and got this response.
Obviously, last week was more boring than expected as hasty bears spoiled the
potential excitement even though inflation was stronger than everyone (but me)
expected. So this week, I want to revisit the potential for a rounded top
as seen in the SPX
for 2015. Most are focused on the diagonal forming in the SPX
for 2024. Avi G -
has already begun warning about a possible SPX 25% summer decline (no J/S)
as diagonals are supposed to return to their beginning (Nov low 4100), but he
does think higher highs are likely with an Apr SPX 5350 top.
However, the DJIA
in 2024 broke out of its diagonal about a month ago and has since traded
sideways in about a 2% range, and the
NDX appeared to break down last week when
int rates (TNX) turned higher on the higher inflation news. So if the SPX
follows the 2015 scenario, it may also trade sideways (currently looking like
5000-5200) until May-June.
A VST Buy was generated for the ST composite last Fri, but could be affected
by the huge vol for tripple witch exp. SPX options OI does confirm,
however. Several INT indicators are at or near a weak Sell that may
indicate a drop in SPX to the low 5000s by mid-Apr..
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 remains near the weak Sell level.
Update Alt EMA. Bearish sentiment remains at the weak Sell level.
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 rose sharply as the capitulation component
(NYDNV/NYDEC) showed strong selling, but may be affected by the 2X volume in SPX
for triple witch exp.
Update EMA. Bearish sentiment VST (grn) rose to a weak Buy and may lead to
ST rally to retest recent highs.
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 modestly but remains below neutral.
CITI Surprise Inflation Index for Mar shows that the trend in inflation
is increasing, esp in the US.
Bonds (TNX). Bearish sentiment is as low as it got when rates
were 0.5% in 2020. Confirming the breakout in int rates (TNX) over its
MAs, oil (WTI/CL1) also broke over $80/bbl.
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 remains below neutral with HUI below the 240
triangle resistance.
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 rose slightly.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment declined slightly.
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 declined to near
the 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 declined, now nearing the 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 dropped to the weak Sell level.
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 Mar 22. 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 5117, options OI for Mon is moderate with put support up
to the 5150 area and call resistance at 5175. A rally to test recent highs
at 5180+ is possible.
FOMC
Wed has smaller OI, currently and will likely change, where SPX shows little
call resistance above 5100, and large put support at 5k. A wide range is
possible.
For Fri stronger SPX OI with puts and calls about evenly matched around 5100
with call resistance 5150. A move toward the straddle at 5100 looks
likely.
For EOM strong SPX OI shows increasing put support that could limit any decline
to 5025-50.
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
remained flat at
a weak Buy to + 1.25 SD, NQ (NDX) moved to a Neutral at -0.25 SD, YM (DJIA) is a weak
Sell at -1.25 SD, Dow theory no longer supports DJIA.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. INT bearish sentiment is dropping, but very slowly,
which probably indicates that an INT correction is likely months away and could
be similar to 2015. A Spring correction to the SPX low 5000s before a
May-June top and a Summer correction of 8-10% remains the preferred outlook.
As mentioned several months ago, economic strength and higher rates (TNX) are
not necessarily bad, but does favor the cyclical (DJIA) vs growth (NDX) stocks.
Weekly Trade Alert. Both the ST composite and SPX options OI are
showing the potential for early strength and possible SPX high retest. SPX
OI options are likely to change, so I will try to post updates Tue/Wed AM for
FOMC. Updates @mrktsignals.
