Last week showed considerable weakness intraday while volatility picked up as
predicted by the VIX call indicator. As noted under the ST Composite a
data glitch at Stockcharts produced faulty data for the week of Oct 7 and was
not corrected until the 14th which resulted in a no call for the week. The
SPX dropped about 1% for the week to 5808 with a low of 5785 Thur, but is showing
increasing support for the 5800 level as indicated in this weeks options OI.
The COT (futures) data showed a weak Sell for the DJIA (YM) and the Dow was down
about 3%, dropping every day, while the SPX was aided by strength in the NDX
with both having neutral sentiment.
The net result in last weeks volatility is an overall increase in bearishness
with the ST Composite and VIX call indicator returning to neutral.
However, The hedge spread remains very low, much like late 2021 and more
volatility is expected, but INT/LT sentiment remains only moderately bullish and
higher prices are possible until extreme bullish sentiment appears.
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 to slightly below a weak
Sell.
Update Alt EMA. Bearish sentiment reversed to slightly above 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 was reported incorrectly last week due to a data
glitch at Stockcharts.com for the entire week of Oct 7 and was not corrected
until Oct 14. The correct sentiment had declined to just above a weak Sell
and now has increased to neutral.
Update EMA. Bearish sentiment remained below neutral two weeks ago and last
week moved to above neutral.
The ST VIX calls and SPXADP indicator bearish sentiment correctly showed a
weak Sell last week and the divergence with the NYSE volume indicator resulted
in a missed call, but has now moved up strongly to well above 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 remains near a strong Sell based on strong
FOMO (call buying).
Bonds (TNX). Bearish sentiment remains at low extremes as rates
continue to creep upwards as the effects of a weakening economy battles with
strong spending and deficits (more borrowing).
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 dropped well below a strong Buy as prices have
backed down to the 2022 highs.
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 has improved to just above a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment remains just below a weak Sell as ETF
P/Cs remain weak.
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 increased slightly
due to higher ETF bearishness vs lower options bearishness.
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 the strong SEll level with the drop in 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 for SPX fell beyond the weak Sell 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 Nov 1. 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 5808, options OI for Mon is moderate as increased put OI
in the 5800s has pushed the BE to 5830 and high OI$. A move above 5825 is
likely.
Wed has small OI where SPX has put support at 5800 and 5750 and moderate call
resistance at 5875 and above. Positive bias to 5850+.
For Thur EOM strong SPX has large OI at 5825 and above, but strong put support
at 5800. Likely target 5800-25.
For Fri w/jobs report, moderate OI and mostly hedges between 5800-900 has a
positive bias below 5850 and negative bias above. Likely close near 5850.
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 -.5 SD, NQ (NDX) is at neutral at -0.5 SD, YM (DJIA) remains a weak Sell -1.0 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. As Kamela seems to permanently have her foot stuck in her
mouth, another Trump term is becoming increasingly likely and may result in a
post-election blow off, but SPX earnings growth is becoming more questionable
and could result in a sharp reversal in SPX prices by late Jan 2025.
Weekly Trade Alert. A trading range between SPX 5800-75 looks
likely. Updates @mrktsignals.
Last week started out strong on Mon with a 1% gap open in SPX, possibly with news that
Israel would not attack Iran's oil fields aided by the continued strength of
Trump in the betting polls
and rallied to 5871 before closing at 5860. Tue saw a sharp reversal that
tested the prior Fri lows at 5800 with a dismal ESP outlook for ASML and then closed
at 5815. A more more or less SPX steady rise for the rest of the week saw
a test of the Mon highs and a new closing high at 5865. Several articles
have recently appeared in ZH questioning the reliability of the betting odds for
Trump as four very large bettors ($30M) all funded by crypto exchanges were
identified as Trump supporters that may indicate some "tit for tat" with Trumps
support for the crypto market.
Sentiment is somewhat mixed as the NYSE Adv/Dec volume is showing strong up volume
creating a ST Buy for the ST Composite even as the ST VIX call indicator drops
to a weak Sell. Most of the INT/LT indicators are showing a weak Sell.
My best guess is a continued advance into the election, but there may trouble
after. Trump has proven himself to be a consummate salesman and may be
gaming the betting odds by garnering support from the crypto market.
Sorry last week, I forgot to hit the publish button on Sat and didn't notice until
Sun AM when I added the link for NAAIM.
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 to a weak Sell.
Update Alt EMA. Bearish sentiment fell to beyond a weak Sell, mostly due to
ETF P/Cs and SPX ETFs.
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 rose sharply with the sell off on Tue to a weak
Buy.
Update EMA. Bearish sentiment spiked Tue to a strong Buy before retreating
to a weak Buy by EOW.
The ST VIX calls and SPXADP indicator bearish sentiment moved to a weak Sell
after a moderate increase in VIX call buying Tue/Wed fell sharply by EOW to
monthly lows.
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 inch down slowly much like late
2021.
Bonds (TNX). Bearish sentiment remains at extreme lows with
rates holding over 4%.
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, using INT view. Bearish sentiment fell below a strong Buy as the HUI
at 345 rose to its highest level since the 2020 high at 370 when int rates
were 0%.
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 bearish sentiment continued to fall beyond the
weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment also fell beyond the 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.
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 was unchanged.
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 reversed back to the weak Sell+ area with the drop in 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 for SPX dropped to near a weak Sell with the drop in 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 Oct. 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 5865, options OI for Mon is moderate with only a slight
negative bias with strong put support at 5750 and strong call resistance at 5900.
Wed has very small OI where SPX with similar support/resistance as Mon.
For Fri strong SPX OI call resistace is at 5900 with moderate put support at
5950 indicates some positive bias.
For Oct 31 EOM SPX OI is moderate where the call resistance from 5840-50 becomes
a pivot as delta hedging may provide support while above and next resistance
becomes 5900.
Currently the TLT is 93.9 with the TNX at 4.07%, there is little call resistance
until 100 and prices have fallen into put support, but ETF sentiment above may
more than offset option effect.
Using the GDX as a gold miner proxy closing at 43.2, prices have moved above
call resistance as ETF sentiment above may more than offset option effect.
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 at neutral at -0.5 SD, YM (DJIA) is
at a weak Sell -1.0 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. Last weeks outlook for a mild pullback proved
unsuccessful other than the 1-day pullback Tue. An additional positive ST
was that the NAAIM exposure index of active risk managers
which was expected to rise, actually fell from 90% to 82% indicating increased
bearish sentiment and more support likely into the election. COT also
showed a surprise as NQ sentiment fell from a weak Sell to neutral.
Weekly Trade Alert. Positive bias likely, but no targets. Updates @mrktsignals.
Last week SPX was expected to be slightly stronger than the previous week
(5700-50) and got off to a good start with a drop Mon to 5690 and a rally back
to 5750 Tue. Wed, however, was a surprise as the rally continued advancing
to 5790 in the AM, possibly due to a sharp drop in oil prices. Inflation
(CPI/PPI) were benign as expected although the core numbers remained stronger
than expected. The rally continued Fri, topping in the SPX low 5820s.
One possible source of the markets sudden strength could have been the result
of Helene and Milton (hurricanes) which ravaged first the southeast and then
central Fla. Stories of lack of support by FEMA from lack of funds due
to generous handouts to illegal aliens over the past year gave the Biden/Harris
admin a black eye and as a result the election odds for a Trump victory soared.
A couple of weeks ago I showed the results of a data analyst's prediction of a
landslide victory for Harris, but the odds have now reversed. The
Fortune article
(cut&paste link to (12ft.io)
discusses the turnabout while the analyst's website
Virtual Tout gives a more thorough explanation of daily results since late
Sept including daily updates up to the election with electoral vote forecast.
Overall sentiment is mixed with the ST indicators (Composite and VIX calls)
remaining near neutral. An interesting divergence is appearing between
other ST and INT/LT indicators for SPX with ST (options. and 3x ETFs) becoming
less bearish while INT/LT are becoming more bearish. Likely expecting a
blow off then crash as in Avi's latest missive.
This increases the potential for an Israel/Iran "surprise" with a positive
outlook after.
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 below 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 dropped back to neutral.
Update EMA. Bearish sentiment declined slightly, but remains positive.
The ST VIX calls and SPXADP indicator bearish sentiment remains near 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 declined slightly below a weak Sell.
Bonds (TNX). Bearish sentiment remains at low extremes as rates
rose to 4.1%.
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 using shorter timeframe for clarity. Bearish sentiment rose back
above 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 declined to a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose slightly but remains near 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 fell due to SPX
options sentiment while 2x ETF bearish sentiment rose. The 3x ETFs
(SPXU/UPRO) sentiment also fell indicating ST bullishness vs INT/LT bearishness
implying increased risk of the opposite occurring.
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 increased sharply to above a weak Sell based on 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 for SPX rose to neutral due to ETF options.
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 Oct 18. 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 5815, options OI for Mon is moderate with strong call
resistance at 5800, 5775 or lower is possible.
Wed has small SPX OI where again there is strong call resistance at 5800.
For Fri AM strong SPX OI indicates that a drop below 5800 is likely.
For Fri PM strong SPX OI indicates that a drop below 5800 is likely with 5750
possible..
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
at a weak Sell -1.25 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. Next week is options expiration and anything is
possible. Sentiment is giving little guidance, but options SPX options OI
is showing the potential for a ST pullback. Looking over some external
indicators, I noticed that the NAAIM exposure index of active risk managers has
a good record of ST/INT tops the last two years when exposure hits 100%+
(current 90%). The smallest drawdown was 2% Dec 2023. (My browser
shows SPX dropping to 0, so use Stockcharts for SPX.)
Weekly Trade Alert. Possible late week drop to SPX 5750. Updates @mrktsignals.
