Last weeks outlook was for a bounce to SPX 5550-600 which was hit by the
Mon-Tue rally tp 5580. The warning was that the Trump "pre-victory party"
was likely over and with ST sentiment still negative, more downside was possible
and outcomes were likely to be driven by earnings. As it turned out Wed
TESLA EPS was negative sending the stock down 12% and pushing the NDX close to
the 10% correction level. INT/LT sentiment remained similar to Nov 2021
and as it turned out there was also an SPX 5-6% correction
late Nov.
One possibility for such an outcome would be a July 31st FOMC announcement for a
Sept rate cut with a final high Sept or possibly after a second cut Dec.
INT/LT sentiment remains similar to late 2021, but not yet at the extremes
seen prior to the Jan 2022 top. ST sentiment has improved enough to
support a corrective rally.
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 continued to decline due to low
hedging (ETF put/calls).
Update Alt EMA. Bearish sentiment remains at a 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, SMA only]. Weights
are 80%/20%.
Update. Bearish sentiment improved sharply from a weak Sell to above neutral.
Update EMA. Bearish sentiment VST reached a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment moved back toward 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 continues to look like late 2021.
Bonds (TNX). Bearish sentiment remains 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 remains at a strong 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).
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment increased sharply, but remains below
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 continued to fall
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 remains at a 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 for SPX remains just above a strong Sell.
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 Aug 2. 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 5459, options OI for Mon is moderate with
support/resistance levels of 5400-500 and little bias from current levels.
Wed has somewhat larger OI where SPX has has stronger upward bias above the
5425 level toward 5500 or higher, but below 5425, the 5325 calls can cause a
negative bias.
For Fri jobs report, strong SPX OI put support up to 5525 should push prices up
to the 5525-50 level.
Using the GDX as a gold miner proxy closing at 36 has a neutral range from 36-38
with support/resistance at 34/40.
Currently the TLT is 93 with the TNX at 4.2%, call resistance is strong at 95
and higher with little put support.
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 below neutral at -0.5 SD, YM (DJIA) is
near a weak Sell -0.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. ST has improved enough for a bottom to be in which
appears to be 3-waves for SPX but 5 waves for NDX. This may mean that the highs
are in for NDX, but SPX may make a higher high. With the latest PCE
showing moderating inflation and oil prices agan below $80/bbl, the Fed may see
enough room to lower int rates modestly which could support stocks for a while
longer. The recent rally in small caps and the banking sector seem to
support this possibiliy.
Weekly Trade Alert. A favorable outlook by the Fed July 31st could
push the SPX back to the low-mid 5500s. Updates @mrktsignals.
Last weeks call for a repeat for the prior weeks pattern of mid-week weakness
worked almost perfectly as Mon-Tue saw minor highs in SPX to 5670 mainly due to
strength in DJIA, but the bottom fell out of the tech sector Wed-Thur, dropping
the SPX 3% (NDX 6%) to a low of 5520 before a late bounce toward 5550 (target
5500-5550).. Fri the expected recovery fell short, however, when an
apparent update by a cloud-based cyber security firm , Crowdstrike, caused havoc
with businesses using MS Windows. Problems with banks, brokerages and
hospitals were widespread and an early rally was sold hard when the news spread,
briefly dropping the SPX below 5500 (close 5505).
Several months ago I had discussed one of the main reasons I was expecting an
important top near the election was that as the election neared and it became
more clear that Trump would win nobody would want to be short. With the
news of the last two weeks of the SCOTUS ruling on Trumps "immunity", Bidens
flub of the debate, and recently Trumps assassination attempt with 24/7 coverage,
Trump has now emerged as a heavy favorite. As a result of one of the strongest
selloffs in the markets for several months was a strong drop in hedging led by the
ETF put/call ratio, now putting some of the INT/LT indicators at levels similar to late 2021.
ST indicators including the ST Composite and VIX call indicator remain at the
weak Sell level so only a weak rebound is expected thru EOM.
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 turned down to a weak Sell lead by
the ETF put/calls.
Update Alt EMA. Bearish sentiment continues its downward trajectory, but
well short of what was seen at the early 2020 and 2022 tops.
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 below the weak Sell and closed slightly above
it.
Update EMA. Bearish sentiment fell below the weak Sell and closed slightly
above it.
The ST VIX calls and SPXADP indicator bearish sentiment fell below the
weak Sell and closed slightly above it.
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 below a strong Sell and appears to be
following the pattern of the last two months of 2021.
Bonds (TNX). Bearish sentiment remains at extreme lows while
rates acted negatively after Trumps tax proposals (more deficits).
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 near a strong 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).
Update. Bearish sentiment remains in a tight range around a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment continues to decline and is now similar
to Nov 2021.
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 receded back to
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 sharply again below the strong Sell based on ETF
put/calls while 3x ETFs are lower than the Jan 2022 top.
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 nearing a strong Sell while 2x ETFs are near
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 July 26 & EOM. A text overlay is used for extreme OI to improve readability,
P/C is not changed. This week skips GDX and TLT OI..
A new addition is added for OI $ amounts with breakeven pts (BE) where
call & put $ amounts cross.
With Fri close at SPX 5505, options OI for Mon is moderate and heavily skewed to
the put side. Put support is strong at 5500 and moderate up to 5550, call
resistance is non-existent until 5700.
Wed has smaller SPX OI where put support extends up to 5985 and a move over 5550
is likely.
For Fri stronger SPX shows put support up to the 5550-5600 and the straddle at
5600 may contain any rallies. Call resistance is at 5630 .
For Wed EOM strong SPX OI is heavily call biased due to the 5325s but is likely
too far ITM to matter. SPX 5550-5600 looks likely for a close.
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) is
near a weak Sell -0.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. It is too difficult to say if last week was the
beginning of something more important. The effects of the "Trump
pre-victory" party are likely over so the next few weeks are likely to be driven
more by earnings. The lack of an increase in bearish sentiment does allow
for considerable more downside, but such an outcome would probably be event
driven such as the Crowdstrike problem Fri.
Weekly Trade Alert. Looking for a bounce to SPX 5550-600. Updates @mrktsignals.
Last week gave no price targets, but a "pop & drop" was expected around the
CPI, and although the CPI was late (Thur instead of Wed) the pop of SPX 1%
occurred Wed with a drop to the early week lows after the CPI. One of the
reasons I expected a selloff following the benign CPI was that much of the
decrease for May and June came from a drop in gas prices of 3.5%+ both months
following oils drop from $87 to $72/bbl. Gas prices dropped from $3.60
in Apr to $3.45 in June and have since risen 1.5% in July as oil has risen from a June low
at $72 ro $84/bbl and gas prices are expected to continue to rise. As a
result inflation is unlikely to continue its drop. Also Fri PPI showed
strong wage pricing pressure, and as an anecdote Dollar Tree is expected to go
to $1.50/item from $1.25 and Planet Fitness from $10/mn to $15/mn due to higher
wages.
Last week saw a huge jump in options FOMO (call buying) and continued
weakness in hedging that may be an indication of a late summer selloff of 8-10%
similar to 2021. For the ST, both the ST Composite and VIX Call indicator
are near/at weak Sells and some mid-week weakness similar to late week seems
likely. Following the VIX call indicator is a chart of the VIX and VVIX
which remains more bullish than bearish for the INT/LT.
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 turned down slightly.
Update Alt EMA. Bearish sentiment VST is approaching a weak Sell.
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 sharply to below neutral last week after
spending the last month near a weak Buy.
Update EMA. Bearish sentiment VST EMAs did reach a weak Sell and may cause
some downward pressure VST next week.
The ST VIX calls and SPXADP indicator bearish sentiment also fell sharply
last week to a weak Sell.
VIX & VIX volatility (VVIX). Bearish sentiment from the VIX is showing some
unusual patterns as many have noted that the VIX (grn) is low compared to the
late 2021 topping period, but the low VVIX compared to the VIX is more like a
bottoming pattern. For ref VVIX is defined as the expected volatility of the 30-day forward price of
the VIX.
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. Bearish sentiment excess option call buying (FOMO) and low hedging
sent sentiment sharply lower below a weak Sell.
Bonds (TNX). Bearish sentiment continues to fall 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 from the 3x ETF remains at a strong Buy as the HUI
has rallied over 5% the past few weeks.
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 near a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment continued to decline reaching a strong
Sell, but as in late 2021, the rally may continue into Aug before a Sept decline
and a final rally into/thru the election.
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 back down
but remains slightly positive.
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 remains near a strong Sell as ETF sentiment continues to
decline.
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 remains higher than for NDX with 2x ETF sentiment
near 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 July 19. 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 5615, options OI for Mon is moderate with strong put
support at 5575 and weak call resistance over 5600.
Wed has small SPX OI where put support drops to 5500 and some call resistance
from 5550-5600.
For Fri AM strong SPX OI with $ amounts strongly skewed to the call side
indicates the potential for a drop to 5500-50 and is likely to be below 5600.
For Fri PM moderate SPX OI shows stronger put support between 5500-50 and call
resistance at 5600. Weakness into Thur to 5500-50 is likely going to be
reversed by Fri close.
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
-0.5 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. Surprisingly, old man Biden insists that he is in for
the long haul, but the Dems don't seem to have a lot of options. Several
weeks ago I saw an article that he may want to stick around long enough to
pardon his son Biden if he is sent to prison and then step down due to "conflict
of interest". Earnings season begins soon and lasts thru Aug which may
provide a cushion for stocks until late summer.
Weekly Trade Alert. Some mid-week weakness again looks possible
this week into SPX 5500-50 area with a recovery back above 5550 by late Fri. Updates @mrktsignals.
