The markets were more resilient than expected as I overlooked the potential
influence of the Pres debate with Trump supporters. They may as well have
wheeled Biden on stage in a wheelchair as he came across both incoherent and
incompetent as the markets cheered as reaching new highs shortly after the open.
The strong SPX OI call resistance for the EOM showed up in the afternoon,
however, and the close for the SPX at 5460 was down 5 pts for the week but well
short of the 5400-25 target.
Overall sentiment remains little changed although much of the negative bias
ST from the extreme low ETF PCs has been worked off. One notable
difference is the NDX (NQ) COT data has moved close to a weak Sell..
The jobs data on Fri is expected to show some weakness with the unempl rate
unchanged, but little reaction is expected from the markets. The following
Wed is likely to be more important with the CPI and Trumps trial result.
Wouldn't it be interesting to go into a Pres election with one candidate unfit
due to mental capacity and the other unfit for moral integrity.
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 has recovered from the low ETF
downward bias toward neutral.
Update Alt EMA. Bearish sentimenthas recovered from the low ETF
downward bias toward 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, SMA only]. Weights
are 80%/20%.
Update. Bearish sentiment remains above neutral.
Update EMA. Bearish sentiment remains above neutral.
The ST VIX calls and SPXADP indicator bearish sentiment moved below neutral,
but well short of a weak 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 improved, but remains below neutral.
Bonds (TNX). Bearish sentiment continues to remain at extreme
low levels.
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 improved above a weak Buy.
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).
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment remains 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 remains at 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 is still recoverig from the extreme low ETF P/Cs opt exp
week.
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 still recoverig from the extreme low ETF P/Cs
opt exp week.
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 July 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 5460, options OI for Mon is moderate. The straddle at 5500
has a slight negative bias, but upside call resistance is at 5500 with little
put support until 5420.
Wed has small OI where SPX call resistance is 5500.
For Fri jobs report, there is modest put support up to 5480 and call resistance
at 5500.
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 0.0 SD, NQ (NDX) is near a weak Sell -0.75 SD, YM (DJIA) neutral at 0.0 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. The markets are showing signs of buying exhaustion as
the last two Fridays saw huge volume on down days after early new highs.
In late 2022, I indicated an expectation of a rally into late 2024, possibly
into the election, and timing wise that has worked out, but pricewise not so
much.
Weekly Trade Alert. A trading range with SPX 5450-5500 looks
probable. Updates @mrktsignals.
No specific guidance was given last week for the SPX other than a positive
bias due to the potential for a continued advance in the QQQ (NDX ETF).
The bull market looked alive and well Mon with the NDX rallying to just below
20K and the SPX above 5K, but the extreme call buying noted for the ETFs (NDX &
SPY) last week put a lid on the rally for the rest of the week. As a
result the NDX was almost unchanged with profit-taking hitting the Mag-7, while
the SPX kept about half its gains at 5465. Last week I noted that Trumps
July 11 sentencing could be a turning point and as it turns out CPI for June is
released the same morning. Gas prices were a major contributor to May's
CPI decline with oil down from Apr's $88/bbl to $77, but oil has already bounced
from the June low at $72 to $81 and is likely to be an upward pressure on CPI
for the next few months. Potential exists for a final blow off (INT) if
one/both July 11th news items are benign.
Overall sentiment does not indicate any major market turns ST, but possibly
by mid-July.
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 fell slightly toward the strong Sell
level as ETF P/Cs remained low.
Update Alt EMA. Bearish sentiment ST reversed to above a weak Sell as ETF
P/C stabilized.
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 fell but remained above neutral.
Update EMA. Bearish sentiment fell below neutral, but closed near it.
The ST VIX calls and SPXADP indicator bearish sentiment fell to neutral.
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 INT continued to fall beyond a weak Sell due
to the Hedge Spread/ETF P/Cs.
Bonds (TNX). Bearish sentiment remains at low extremes.
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 the weak Buy level.
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 at the beginning of the week then
bounced back to the weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment continued to fall across all time frames
with the LT(blu) at the weak Sell level (-1 SD). Similar to July 2023, an
8-10% may occur if the LT EMA reaches -1.5 SD.
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 negative.
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 is at low extremes due to 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 is at low extremes due to ETF P/Cs.
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 June 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 for Dec exp.
A new addition is added for OI $ amounts with breakeven pts (BE) where
call & put $ amounts crossand $ volume.
With Fri close at SPX 5465, options OI for Mon is moderate with high P/C but off
setting ITM calls, indicating a likely range of 5450-5500.
Wed has smaller OI where SPX has lower P/C and a wider potential range of
5400-500.
For Fri stronger SPX OI with a large contingent of ITM calls could pressure
prices toward put support at 5400-25 .
Using the GDX as a gold miner proxy closing at 34, put support is at 33 and call
resistance at 36.
Currently the TLT is 94 with the TNX at 4.26%, TLT is at moderate call
resistance with put support at 90. The large straddle at 92 is "max pain" and
could attract prices
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
slightly positive at +0.1 SD, NQ (NDX) is slightly positive at +0.1 SD, YM (DJIA)
remains just below neutral at -0.1 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. The new adage seems to be that stocks take the
elevator to the top but bearish sentiment takes the stairs down. The main
reason why I had been looking for more of a rounded top was to allow for more
time for bearish sentiment to decline. The DJIA has mostly followed this
pattern trading between 37k to 49k since Jan, but the AI powered NDX has pulled
the SPX along for the ride.
Weekly Trade Alert. Next week is likely to have a negative bias
with an SPX OI target of 5400-25 for the EOW/EOM. Updates @mrktsignals.
At least I was not bearish last week. The CPI was expected to moderate
due to lower oil prices and the FOMC was expected to leave rates unchanged, but
the big surprise was that CPI was unchanged MoM due to a 3.6% drop in gas prices
with many items unchanged. That was good enough for an SPX 100+ pt romp
above 5400 even with a "hawkish" FOMC. Surprisingly ST sentiment became
more positive which could mean more gains ahead. Similar to mid-2015, the
DJIA appears to have topped in May, while the NDX keeps powering ahead; the main
difference is that SPX is more positive. A look at the QQQ (NDX/40)
options OI for next Fri shows that more gains are possible into options exp.
The biggest change in sentiment last week was the 3rd & 4th lowest ETF P/C
since 2014 with ETF calls over 2M on Wed & Thur, or 4x daily avg.
Historically, this has not been particularly relevant for the very ST vs the
extremely high P/C, but for the INT it does show frothiness is building.
As a solution for the downward bias in EMAs for the UVXY $ Vol/SPX Trend, the
SPX trend is omitted going forward for EMAs. COT shows a slight
improvement in sentiment for DJIA, SPX and NDX.
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 declined sharply to a weak Sell due
to the extreme low ETF P/Cs Wed & Thur.
Update Alt EMA. Bearish sentiment VST (grn) reached a strong Sell, but the
LT (blu) is more reliable as an INT indicator.
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 positive below a weak Buy.
Update EMA. As noted June 7, the prolonged SPX uptrend caused the SPX Trend of the UVXY $ Vol
component to bias the EMA downward so the SPX Trend adj was removed for the EMA.
Bearish sentiment improved to near a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment moved up from neutral,
but well short of a weak Buy.
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 (due to ETF P/C), but note 2022
top required LT (blu) to reach a strong Sell.
Bonds (TNX). Bearish sentiment remains at low extremes.
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 fell to the weak Buy level as ETF sentiment
declined.
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 to a weak Sell and seems to be following
the pattern of 2nd half 2021.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment fell to a weak Sell Wed/Thur with the
ETF P/C then bounced.
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 fell to a strong Sell due to the low 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 fell near to a strong Sell due to the low ETF P/Cs.
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 June 21. 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 5432, options OI for Mon is moderate with neutral OI
between 5380 to 5475.
Wed June 19th is a Holiday.
For Fri AM strong SPX OI call resistance exists above 5400 and may pressure
prices lower.
For Fri PM moderate SPX OI shows weak call resistance down to 5350.
For Fri PM strong QQQ (NDX/40) OI shows that prices have jumped over strong call
resistance for 465-75 and faces decreasing resistance over 480. Thus delta
hedging could aid higher prices toward strong resistance at 500 (NDX 20.5k).
BE is 451.
For Fri EOM strong SPX OI shows put support up to 5400 and strong call
resistance at 5500 and super strong at 5600. Ignore BE.
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
slightly positive at +0.1 SD, NQ (NDX) is slightly positive at +0.1 SD, YM (DJIA)
improved to just below neutral at -0.25 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. Late June and early July could provide some hurdles
for the markets ST with Trumps SCOTUS immunity to insurrection charges late June
and the "hush money" sentencing July 11. Oddsmakers are showing only a 17%
probability for jail time and I am beginning to wonder if this won't be a "sell
the news" event due to the current optimisn.. This is the best discussion
I have seen so far of the sentencing.
Weekly Trade Alert. No price targets, but a slight positive bias. Updates @mrktsignals.
