Last week SPX was expected to move up from 5950 to 6000-50 before a retreat
into the EOM to 6000 or lower and the week started strong and got as high as
6049.75 before beginning a sharp selloff to the Fri AM lows at 5932 on low
volume and little news. SPX options OI is indicating an up-down-up week
around the SPX 6000 area. Wed is New Years so volume may remain light.
Several EW analysts are expecting a sharp selloff to begin the year with Avi
still looking for the SPX 5600s, while Dr Shures
outlook for the NDX is about a 1000 pts lower. We should see some
indication the following week of Jan 6 when volume returns with the Fri jobs
report on the 10th and the FOMC on 29-30th when the Fed is expected to pause
rate cuts.
Sentiment remains fairly non-committal at this point. The ST Composite
has retreated from the strong Buy of a week ago while the VIX Call & SPXADP
indicator remains near a strong Buy. I expect some strength into the first
few days of Jan with a possible retest of the Dec highs at SPX 6100 before some
weakness into options exp on 17th to 6000+/-. Then EPS should be mostly
positive, but the FOMC at EOM is a wildcard.
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 moved up to neutral then retreated toward
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 from a strong Buy to below a weak Buy.
Very low volume may be distorting results.
Update EMA. Bearish sentiment fell sharply with VST (grn) reaching a weak
Sell.
The ST VIX calls and SPXADP indicator bearish sentiment remains near a strong 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 to a strong Sell.
Bonds (TNX). Bearish sentiment remains at extreme lows as TNX
rates are testing the upper TL of a bearish flag.
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 between a weak and strong Sell.
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, now nearing a strong Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose toward neutral early in the weak
then fell to unchanged.
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 near
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.
I am switching to a shorter timeframe as I recently noticed that in 2024 there were several divergences
between ETF funds and options, unlike 2023, and usually the funds seem more
accurate. Bearish sentiment fell, but remains above a weak 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 fell back to 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
Jan 3 & 17AM. 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. Note multiply OI$ by 100 for shares/contract.
With Fri close at SPX 5971, options OI for Mon is moderate with put support up
to 6000 and more ITM puts indicate a BE of 6025, so 6000-30 looks likely.
Tue EOM has larger OI where SPX has huge call resistance at 6050 and a BE at
6000, so expect weakness toward 6000.
For Fri SPX has moderate OI with a larger ITM OI$ than Mon so a move to BE at
6030 is likely and could move higher due to weak call resistance.
For Fri 17 AM Jan exp shows SPX OI is moderate, but balanced, and a large
straddle at 6000 (also BE) may keep prices near that level.
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
moved to a negative at 0.25 SD, NQ (NDX) bearish sentiment remains a strong Sell at -2.25 SD, YM (DJIA) remains a weak Sell -1.0 SD.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Last weeks outlook for Santa gone astray turned out to
be accurate as the official Santa's rally is supposed to be the five days between
Xmas and New Years, but Jan may prove to be more challenging. Uncertainty
over policies of the new administration are likely to keep the markets in check
and a "positive shock" such as peace in Ukraine or tax cuts may be necessary to
create a final push higher into mid-year. The canary in the coal mine so
to speak is likely to be INT/LT rates which reflect inflation and excess demand
from deficit spending and a break of the 10 year (TNX) over 5% may indicate the
beginning of the end.
Weekly Trade Alert. SPX is likely to be positive for the most part with
an EOM target around 6K and an upper range for the week similar as last week or
6000-50. Updates @mrktsignals.
Two weeks ago I began warning that a large negative bias was present in the
SPX Dec 20 options open int. At this point I should confess that I have been
using $ OI base on 1 share/contract so that amounts are actually 100 times what
was stated, and a note was added this week. The warning was that weakness
similar to the Nov exp was expected, but in Nov there was a negative call bias
of $350B whereas in Dec the bias was $1.6T or almost 5 times as much, so after
the FOMC decision, which was widely expected, options dealers started selling
futures creating a spiral of falling prices with stops triggering the last hour.
The BE for the Fri AM was SPX 5900, but I had expected it to hold and instead
prices fell to a low of 5830 before a strong reversal. Sentiment, however,
is much the same as after a longer selloff over the month of Sep 2021 which was
followed by a multi-month rally of about 10% (see Tech/Other) into the Jan
2022 top. This could mean an Apr-May top in 2025.
One thing that was glossed over by the media were the comments that Powell
made with the FOMC decision about bitcoin ($BTCUSD). Essentially
he said (no J/S) that the Fed was not authorized to
hold crypto and indicated skepticism about holding speculative assets.
Likely this means that Congress, Treasury and the Fed all need to agree on
setting us a strategic reserve of bitcoin. Probably, a new more
receptive Fed appointed by Trump in 2026 is needed. An interesting
EW scenario by Dr. Shure discusses one way this
could playout with a 50% correction in BTC into 2026 before a SC5 blowoff.
In case this does work out I have decided to add an occasional options OI for
IBIT the Blackrock BTC ETF starting this week.
ST sentiment is now at a strong Buy, but still faces the large call wall at
SPX 6050 at Dec 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 remained in a narrow range.
Update Alt EMA. Bearish sentiment remained in a narrow range.
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 from a weak Buy to a strong Buy.
Update EMA. Bearish sentiment rose from a weak Buy to a strong Buy.
The ST VIX calls and SPXADP indicator bearish sentiment rose from a weak Buy
to a strong 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 continued to rise but remained below neutral.
Bonds (TNX). Bearish sentiment remains at extreme lows as TNX
rates reached the top of what appears to be a bullish flag (down slope trend).
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 below a weak Sell, where sentiment and
prices trend look similar to mid-2022 and from a slightly higher level which
could mean a lower target around HUI 200.
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 is little changed.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment declined slightly and remains at
dangerous levels.
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 near
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 below a weak Sell with weak hedging.
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 little changed.
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 Dec 31. 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. Note multiply OI$ by 100 for shares/contract.
With Fri close at SPX 5931, options OI for Mon is moderate with strong put
support to the low 5900s should see 5900+ (Sat debt ceiling passed).
Wed is Xmas holiday, best wishes.
For Fri SPX OI is small, but prices could push toward BE at mid-6000s.
For Tue Dec 31, SPX OI is large with very strong call resistance at 6050 and a
BE at 6000, indicating a target of 6000-50 or lower.
Using the GDX (Jan not Jab) as a gold miner proxy closing at 34.3 shows a BE at
35 with strong put support at 33 and call resitance at 37. Not much bias
either way.
Currently the TLT is 88.3 with the TNX at 4.52%, have fallen thru strong put
resistance at 90 and could fall toward 87 with BE at 93. ETF sentiment
above is a negative.
Currently the IBIT is 54.8 with $BTCUSD at 96.9k, low P/C is one reason why BTC
is weak with lower put support at 48-9
IV. Technical / Other
Several months ago, I tried to setup a more complex composite to mirror the
earlier composites before I started the data mining project. As it turns
out, it works pretty well as a ST/INT indicator although there a too many lines
to read, but the EMAs are clearer.
Called the Technical Indicator Composite, the past several months have shown
sentiment similar to mid-2021 with the current sentiment matching that of the
Sept 2021 decline which was followed from a 10%+ rally from below SPX 4300 to
4800+ for the next four months to Jan 2022. From the 5830 low, a 10% rally
is 6400+.
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
remains a positive +0.25 SD, NQ (NDX) bearish sentiment remains a strong Sell at -2.25 SD, YM (DJIA) remains a weak Sell -1.0 SD.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Although ST sentiment is showing a strong Buy, the
INT/LT sentiment, including the hedge spread remain weak, so although I think
the markets may rally for several months, it is likely to remain fairly volatile.
Weekly Trade Alert. SPX options OI is indicating that a rally into
the low-mid 6000s is possible next week, starting with news of a budget
compromise, but a pullback is likely into EOM. Updates @mrktsignals.
Last week the ST sentiment indicators were neutral, and the SPX options OI
was indicating a tight range (6050-75) at the close with a Friday target of
6050 after the previous Friday closed at 6090. In fact daily SPX closes
were 6053, 6035, 6084, 6051, 6051, so about as good as possible. This
week, the ST indicators, both ST Composite an VIX calls & SPXADP are at weak
Buys with SPX options OI supportive of a move into the top of the current range
6080-90 into Wed, but the Fri monthly call OI$ may present a problem, although
SPX 6000 or lower may be difficult to reach.
A look farther out to the EOM shows a huge call wall at 6050 (likely JPM
hedged fund) and may limit further
upside until Jan. With a continuing strong economy, EPS season starting
mid-Jan could be the start of the next rally phase.
Discuss.
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 increased slightly.
Update Alt EMA. Bearish sentiment increased slightly.
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 from above neutral to above a weak
Buy.
Update EMA. Bearish sentiment rose to a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment rose above neutral to 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 rose above a weak Sell.
Bonds (TNX). Bearish sentiment remains at extreme lows as rates
rose from 4.15% to 4.4% in one week after taking two weeks to drop from 4.5%.
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 remained at a weak Sell as prices whipped from 330
to 300.
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 increased slightly.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose back to 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 declined for both
options and ETFs tp near 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 rose from 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 rose above 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 Dec 20. 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 6051, options OI for Mon is moderate with strong put
support up to 6040 and little call resistance until 6150, but OI$ may limit
upside over BE.
Wed has smaller SPX OI with some put support up to 6075 and BE at 6070, so
prices may rise to the top of the current range.
For Fri AM very strong SPX call ITM OI$ (net $11B) could indicate a weak open
following FOMC on Wed.
For Fri PM moderate SPX OI shows strong call resistance at 6100, and little put
support until 5800.
For Dec 31 EOM, SPX has strrong OI with a huge call wall at 6050, likely the JPM
hedged fund, and put support at 6000. A possible EOM target of 6000-50.
IV. Technical / Other
Last week, I showed the history of the SKEW where the EMAs in record
territory since Trump one served as an early warning of an important top several
months in advance. This week I want to look at the NYSE Up/Down volume
EMAs. Comparing to the tops from last week in late 2018 and 2021, both
times the 100 day EMA fell to 1.5 about 1 month before the SPX topped.
Currently the EMAs are falling but may be several months from a Sell.
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
continued its reversal to a positive +0.25 SD, NQ (NDX) bearish sentiment increased to a stronger Sell at -2.25 SD, YM (DJIA) remains a weak Sell -1.0 SD.
Click dropdown list to select from the following options:
Tech / Other History
2024
2023
2022
Other Indicators
Conclusions. Consensus is that high consumer sentiment will be
enough to end the bull market in stocks, but money flows into options and ETFs
is telling us that investor sentiment is still moderately bearish and will
continue to support higher prices for several months.
Weekly Trade Alert. A move into the top of the current range (SPX
6080-90) looks likely into Wed, but post-FOMC is unclear as large ITM call
positions Fri AM & PM could put downward pressure on stocks. Updates @mrktsignals.
