Full Steam Ahead for Now

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
   09.07 A look at DJIA/SPX analog from the 2000 market top shows possible strength into year-end.    05.25 A possible rounded top aka May 2015, Initial Claims lead Unempl Rate, LT NYADV/Dec warning.    02.17 A potential analog to early 2007 with early Spring and Summer pullbacks before Fall rally.    01.13 A look at LT SPX P&C, very high volume may compress range to 4650-4850 for mns, current Sell.
2023
   12.23 A quick update to the DJIA infl adj comparison presented as a possible analog Dec 2022    12.08 A look at the Feds recession indicator based on the unemployment rate using the Sahm Rule    10.21 A comparison of 5 year periods (1960s, 90s & today) for inflation and int rates (Fed funds & TNX)    09.29 A ST trend for TNX, INT/LT COT bearish for bond futures (TN), LT 20/30 yld curve    09.22 A look at Dow Theory and a DJIA diagonal and possible similarities to late 2015    09.15 Use of Brave browser Shield for enhanced internet access to some sites    07.22 A closer look at the 1966-74 markets indicate marginal new ATHs likely around 2024 Pres election    07.08 TNX since 2020 shows bounce likely temp w/ more back&fill before rounded bottom completes    07.01 Sentiment for BKX is at warning levels, Barcharts ES sentiment is now neutral.    06.24 Another update to VIX call indicator using VIX P/C; how volatility (VIX) effects options pricing    06.17 OTDE Volume & Put/Call Ratio Drilldown - low volatility (VIX) ahead    06.10 Volatility indicators warning of a nearing top    05.20 A review of indicators that performed well in 2015s rounded top    05.13 Comparing the VIX term structure (VIX/VXV) and volatility ratio (VIX/VVIX)    05.06 A review of the current int rates (TNX), unemployment and CPI compared to the 1960s    04.29 Addressing the negative M2 growth misconception, adding Barcharts ES outlook    04.15 Several LT/INT indicators show INT gains likely (SKEW&VIX/VXV,VIX/VVIX,BPSPX&SPXADP)    03.25 Comparison of PCE inflation and TNX rates to late 1990s indicates possible tech meltup    03.18 Strong SPX volume at Mar optn exp supports Spring rally of 10%+    03.11 Low SPX P/C ratio indicates likely trading range    03.04 LT T-bonds (10/20yr) => more Fed tightening, LT NYSE Adv/Dec volume => possible ATH retest    01.28 SPX correlation w/liquidity, Fed bal sheet - Treasury Gen Acct - O/N reverse repo    01.14 Volatility indicators, ST VIX calls indicate pullback SPX 200 pts, INT/LT SKEW & VIX/VXV still bullish    01.07 Gold performance relative to int rates (TNX), and China stock market (SSEC)
2022
   12.24 Late 1960s analog, TNX,Unempl & CPI => Recession 2024-25, DJIA top Feb'66 retest late '69    12.17 A contrarian view to the consensus 2022H2 recession & bear narket low of SPX 3000    12.10 Yield curve inversion (since 1980) not perfect recess indicator compared to inflationary 1960-80    11.26 Sentiment indicators showing a sharp drop late Dec as a setup for a strong Spring rally    11.19 Sentiment indicators showing choppy move higher likely before pullback    11.05 Using the SPXADP with the VIX call only indicator improves effectiveness

Other Indicators
   U.S. 10 Year Treasury Note (TNX Rate), Futures, Extended Hours    ES (S&P 500), Futures, Extended Hours +    NDX (NASDAQ 100), Futures, Extended Hours    Marketwatch Economic Release Calendar    INT/LT Rydex 3x Bear/Bull Fund Ratio    INT/LT NYSE Up/Down Volume 100 & 200 DMAs    S&P 500 Historical Charts with Inflation Adjustment    DJIA 100 Year Historical Charts with Inflation Adjustment

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.

Investment Diary,  Indicator Primer, Tech/Other Refs,
 update 2021.07.xx  Data Mining Indicators - Update, Summer 2021,
 update 2020.02.07 Data Mining Indicators,
 update 2019.04.27 Stock Buybacks,
 update 2018.03.28 Dumb Money/Smart Money Indicators

Article Index 2019 by Topic, completed thru EOY 2020.02.04
Article Index 2018 by Topic
Article Index 2017 by Topic
Article Index 2016 by Topic

Long term forecasts

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