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.
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