Last week was the most convoluted pop&drop I've ever seen with the news of
continued accounting problems at SMCI Mon-Wed which effected the entire tech
sector. NVDA EPS late Wed was a non-event with an initial selloff then a
Thur-Fri recovery.
I had hoped to show some charts comparing the current tech runup to
1999-2000 but it looks like I'm running out of time. Overall sentiment is
showing no major changes with the ST Composite and VIX call indicator near
weak Sells. One of the indications from 1999-2000 is an initial sharp
decline in Apr and a double top 6 mns later. This would put a double top
near the election.
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 remains at the weak Sell level.
Update Alt EMA. Bearish sentiment remains 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, SMA only]. Weights
are 80%/20%.
Update. Bearish sentiment remains just below a weak Sell.
Update EMA. Bearish sentiment remains near the weak Sell level.
The ST VIX calls and SPXADP indicator bearish sentiment remains near 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 remains near a weak Sell.
Bonds (TNX). Bearish sentiment remains at extreme lows.
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 has moved back to 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).
Update. Bearish sentiment remains below neutral.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment bounced from a weak Sell to 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 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 moved below a weak Selll level.
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 toward a weak 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 Sept 7. 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 5648, options OI for Tue/Mon holiday is noderate with
snall call resistance at 5950 and above, Strong put support ar 5550 .
Wed has very smalll OI where SPX has a large straddle at 5600 and moderate call
resistance ar 5650.
For Fri strong SPX OI pur support is ar 5450 with call resistance at 5650 anb
5700.
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 a weak Sell at -1.25 SD, YM (DJIA) is
neutral -0.25 SD. Note updates are Tue, so may be out of date.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. NDX sentiment remains negative and may indicate
limited gains. SPX Could remain in a trading range with a positive bias as long as data (jobs, Sept 6, CPI, Sept 11) supports Fed rate cuts, FOMC Sept 17-18.
Weekly Trade Alert. Expecting positive bias with occasional ST pullback. Updates @mrktsignals.
The stocks market has been rallying since the Oct 2022 "Fed pivot" based on
the expectations of lower int rates from the Fed. At first, 6 int rate
cuts were expected by EOY 2023 based on the inverted yield curve as a "perfect"
recession indicator, but as 2024 started there were still no int rate cuts and
no recession. Now as a second Fed recession indicator has triggered, the
"Sahm rule" with a 0.5% increase in the unemployment rate, J. Powell has finally
decided to take action with his forecast of future rate cuts starting in Sept at
his Jackson Hole speech. However, you have to wonder how much buying
ammunition in support of rate cuts is remaining. The outlook remains
generally positive into the election, but major policy changes are likely to
muddy the outlook for 2025 and beyond.
Last weeks SPX OI outlook was for possible positive delta hedging Mon (over
5550) with some pullback later in the week, and Mon saw the bulk of the rally
for the week over 5600 to about 5620 before a pullback to 5560 Thur.
Powell's Jackson Hole speech provided a rally to new weekly highs, but stalled
at the 5640 level, about 0.5% below the ATH. Next week's NVDA EPS on Wed
will likely be the key for a run to SPX 5700. So far the NDX remains about
5% below its ATH of 20.7k, only retracing about 2/3rds of the decline since the
July high.
ST sentiment turned more bearish, at least before the Thur pullback, with the
ST Composite reaching a strong Sell and the VIX call indicator joining at a weak
Sell. However, the strong reversal at the EOW could mean a mid-week pop
before another pullback to the SPX mid-5500s or lower.
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 retreated slightly from the neutral
level seen last week.
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, SMA only]. Weights
are 80%/20%.
Update. Bearish sentiment fell to a strong Sell and closed the week still at
a weak Sell.
Update EMA. Bearish sentiment reversed sharply with the pause around SPX
5640 and the pullback Thur. NVDA EPS on Wed could be pivotal.
The ST VIX calls and SPXADP indicator bearish sentiment reached a similar
Sell level as before the early Aug selloff.
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 only increased modestly at the early Aug SPX
lows and remains very similar to the late 2021 topping period.
Bonds (TNX). Bearish sentiment remains at extreme lows.
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 has retreated but remains at the 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).
Update. Bearish sentiment remains less than neutral.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment correctly reached the near strong Sell
at the July highs and reversed to a VST (grn) near strong Buy at the Aug lows,
but is now slightly below neutral after reaching a weak Sell Wed.
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 is moderately
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 at the weak Sell level.
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 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 Aug 30. 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 5635, options OI for Mon is moderate with little put
support until 5450 while momentum may support prices with call resistance at
5650 .
Wed has smaller SPX OI where SPX has less call resistance and put support up to
5600 via straddles, so not particularly bearish.
For Fri EOM strong SPX OI with strong call resistance at 5650 and some put
support via straddle at 5600 and below that mid 5500s is possible.
Using the GDX as a gold miner proxy closing at 39.3, prices are well over put
support, contrary to what is showing with the 3x ETFs DUST & NUGT, with major ST
resistance at 40.
Currently the TLT is 98.4 with the TNX at 3.81%, O/H major ST call resistance is
at 100.
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 a weak Sell at -1.0 SD, YM (DJIA) is
neutral -0.1 SD. Note updates are Tue, so may be out of date.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. My luck at trying to forecast big tech EPS has been
pretty poor, so I am not going to try with NVDA. There has been a lot of
discussion about the Zweig breath thrust that may or not have been triggered
with the recent rally due to differences in rounding. The difference being
that a valid ZBT means another 12 months of higher prices. I will defer to
the LT NYSE adv/dec volume chart, which is positive
but so far not that impressive and similar to July-Aug 2019 vs Dec 2018.
Weekly Trade Alert. A mid-week pop to SPX ATHs near 5700 is
possible with positive results from NVDA Wed, then followed by a partial retrace
of the recent rally into mid-Sept . Updates @mrktsignals.
Last week was expected to be positive, up to about the SPX 50D SMA at 5450,
but after a flat Mon, the Tue PPI came in weaker than expected setting off a
strong rally to just below 5450 based on support for a dovish Fed, while Thur
strong retail sales squashed recession fears and set off another strong rally to
SPX 5540. As it turns out the high for the week for NDX was the 50D SMA.
Fri continued the rise erasing all of the 3 day "flash crash" following the BOJ
rate hike early Aug.
The ST Composite has now reversed from a weak Buy to a weak Sell, so some
pullback is likely soon. The VIX call indicator remains near neutral,
however, so the pullback is expected to be modest with lower volatility.
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 rise from a weak Sell
to neutral.
Update Alt EMA. Bearish sentiment fell 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, SMA only]. Weights
are 80%/20%.
Update. Bearish sentiment reversed completely from above a weak Buy to below
a weak Sell, near the level of the July top. The 1st wave up is likely
near an end.
Update EMA. Bearish sentiment VST (grn) shows an even sharper reversal.
The ST VIX calls and SPXADP indicator bearish sentiment correctly called for
an increase in downside volatility from the July top, but did not reach a Buy at
the lows and is not showing a Sell now. Any pullback from current levels
is not likely to be as extreme.
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 has reversed from positive to a weak Sell.
The strong Sell at the July highs matched the level of the July 2023 highs which
also resulted in a SPX 500 pt decline, but over 3 mns.
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 reached an even more extreme Buy based on huge
volume in the inverse NUGT Aug 12.
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 declined from above neutral to a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment continued to decline, now right at
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 has remained much
closer to neutral than prior to the Jan 2022 top, perhaps this due to more
hedging with ETF options, see NDX & SPX below.
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 rose sharply above the weak Sell level due to hedging with
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 rose to positive, 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 Aug 23. 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 5554, options OI for Mon is modest where delta hedging is
positive above 5550, but below 5550 could target 5500.
Wed SPX OI is smaller with a slight bias toward 5500.
For Fri moderate SPX OI indicates a similar bias as Mon/Wed with a bias toward
5500 or lower, strong put support is at 5400.
For Fri EOM strong SPX OI also indicates a bias toward 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 a weak Sell at -1.0 SD, YM (DJIA) is
neutral -0.25 SD. Note updates are Tue, so may be out of date.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Two weeks after the "flash crash", the SPX has now
retraced about 78% of the entire decline from SPX 5670. Many were
expecting the beginning of a major bear market, but continued moderation in
inflation and a resilient economy continue to support markets. With Trumps
second presidency seeming to be a done deal a couple of weeks ago, a potential
upset seems to be lurking in the shadows with recent polls showing Harris'
support vs Trump almost twice that of Biden according to
AskAI.
A Trump loss could be a major surprise and provide another "gray swan" event for
the markets.
Weekly Trade Alert. SPX options OI indicates a possible pullback to
5450-5500 thru EOM. Updates @mrktsignals.
