Last week was expected to be mildly positive due to the ST Composite moving
to a weak Buy and most other indicators near neutral, and SPX prices
exceeded expectations (6850-6900) with a push to new ATHs, closing at 6930.
Fri moved to SPX 6945 for about 5 min at the open and 6950-7000 is the target
for some EW analysts. Although volume was low all week, the relative
volume for the SPX 2X ETFs (SDS/SSO) was sharply lower, moving several SPX
options and ETF indicators to a weak Sell. The DM/SM indicator also spiked
lower to the lowest level since the Jan 2022 SPX peak. Other ST indicators
are near or below neutral so an INT top is likely near.
Last weeks top showed even more divergences. Mid-Dec options exp showed
a divergence with the DJIA making an new ATH with the SPX short by about 1% and
the NDX by 3%. Last Fri ATH by the SPX showed the DJIA lagging and the NDX
even lower than mid Dec. Comparison to the tech bust of 2000-02 shows that
a rolling top of several months is possible. SPX options OI indicates some
weakness next week is probable with a target of 6850-75.
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 as SDS to SSO
volume continues to fall sharply after the Nov reverse split spike.
Update Alt EMA. Bearish sentiment fell to 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 from a weak Buy to neutral.
Update EMA. Bearish sentiment spiked lower mid-week to a weak Sell VST (grn)
then rebounded on Fri.
The ST VIX calls and SPXADP indicator bearish sentiment fell below neutral.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (52%)
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 from above a weak Sell to a weak Sell LT
(blu) and strong Sell VST (grn).
Update EMA. Bearish sentiment dropped from neutral to just above a weak Sell.
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 remains at a strong Buy. As discussed in
Tech/Other, US fundamentals (inflation, int rates) do not support current gold
prices, but China may be the cause with
inflation at two year 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 dropped sharply from above a weak Sell to a weak
Sell LT and strong Sell VST (grn).
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment remains little changed above 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 from above
neutral to near a weak Sell.
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 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 for SPX fell below a weak Sell with the continued decline
in 2X ETF sentiment.
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 2, 2026. A text overlay is used for extreme OI to improve readability,
P/C is not changed. Also, this week includes a look at GDX, TLT & IBIT for Mar 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 6930, SPX 6930 is a pivot were above could see positive
delta hedging toward 6950, but below could drop to 6875-900.
SPX options OI for Wed EOM is large and shows a strong bias downward if below
the 6900 pivot where put support is 6840 and BE is 6835, but 7k puts give some
support. SPX 6850-6900 is likely.
SPX options OI for Fri is moderate with call resistance at 6925 and little put
support until 6850. BE at 6875 looks likely.
IV. Technical / Other
Several years ago I noted that their seemed to be a fairly strong correlation
between China's stock market (SSEC) and the price of gold. Its interesting
to note that in late 2018 both were about 2400 and about a month ago the SSEC
hit 4350 with gold lagging and now gold is 4500. The idea is that the
Chinese populace has been speculating in gold for thousands of years and
are a big driver of gold prices. Both are likely driven by China's
stimulus programs.
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 positive at + .5 SD, NQ
(NDX) remains at a strong Sell near -2.15 SD, YM (DJIA) remains near a weak
Buy at +.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Santa took a break and did not completely forget
Christmas, but may have a hang over going into next week. Last weeks NVDA
$20B acquisition of Groq via licensing and poaching its leaders to gain access
to Google's TPU chip models only received a yawn from WS, indicating more
evidence of AI tech topping.
Weekly Trade Alert. Some pullback is likely by EOW with SPX options
OI pointing toward the 6875 level. Updates @mrktsignals.
Last weeks outlook for more of the same rangebound market (SPX 6800-6900)
ended up being too conservative, but the drop to SPX 6720 seemed too much based
on slightly weaker than expected jobs report with the unemployment rate jumping to
4.5%. I had also warned of a rate hike by the BOJ which could effect the
yen carry trade and the decline was more likely a "Sell the rumor". The
hike occurred before the market open Fri but was considered a
"dovish hike" causing the yen to
fall 1%, supporting the yen carry trade; and as a result, markets rallied back
to the target closing range of SPX 6825-75 at 6834.
Overall, bearish sentiment improved slightly but remains below neutral,
however, the ST Composite did rise to a weak Buy. One disturbing external
indicator, the NAAIM investment managers exposure index, rose above 100% as of
Wed close. The last time the NAAIM index was over 100% was Oct 29, right
before a 3 week decline from SPX 6880 to 6520. Combined with this weeks
SPX options OI, the outlook is for several days of mildly positive action with a
more serious decline beginning the following week, possibly due to tax loss
selling, that last several weeks.
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 was mostly unchanged and remains
below neutral.
Update Alt EMA. Bearish sentiment surprisingly fell for the week closing
near a weak Sell VST (grn).
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 continued to rise, slightly above a weak Buy.
Update EMA. Bearish sentiment closed right at a weak Buy.
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 (52%)
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 from a weak Sell mid way to neutral.
Update FOMO calls. Bearish sentiment continued to rise to neutral.
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 remains well above a strong Buy as gold retests
its ATH.
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 rose slightly above a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose from a weak Sell halfway to
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 continues to fall
toward 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 slightly 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 for SPX remains just 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 26 & EOM. A text overlay is used for extreme OI to improve readability,
P/C is not changed. Also, this week includes a look at GDX, TLT & IBIT for Mar 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 6834, options OI for Mon is moderate with little nearby
put support and call resistance over 6850. A 6800-50 close is likely.
Wed SPX options OI is similar to Mon, however, over 6850 could see positive
delta hedging toward 6900.
For Fri SPX options OI has more put support up to 6850 with call resistance at
6900.
Wed EOM Dec 31, SPX options OI has strong call resistance down to 6800, but ITM
puts may offer some 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 remains positive at + .6 SD, NQ
(NDX) remains at a strong Sell near -2.15 SD, YM (DJIA) remains near a weak
Buy at +.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. The year 2025 is ending much like 2024 for the SPX.
In 2024 a 3 month trading range stretched from Dec to Feb before the Trump
tariff scare and in 2025 we have seen a trading range since Oct. Both
years ended with WS bullish for the coming year and stretched bearish sentiment.
This years gains were concentrated in the Mag7 AI-related tech stocks and some
"reversion to the mean" is likely. The question is whether the laggards
play catch up as WS surmises or whether the tech leaders catch down. My
bet is on the latter.
Weekly Trade Alert. SPX options OI is showing the potential for a
move to 6850-6900 by Fri, but 6800 or lower by EOM. Updates @mrktsignals.
The overall outlook last week was for more of the rangebound
trading with a possible "Sell the news" after the FOMC expected rate cut spike
in SPX. The actual outcome was similar, but a Mon decline to SPX 6850 set
the stage for a limited spike to just over 6900 Wed and the decline was mostly
O/N with the late ORCL earnings showing weak profits, setting up a lower open at
6825 on Thur and a reversal back to 6900 with expected strong EPS from Broadcom
(AVGO). But Fri more negative AI news came out with leasing problems from
a Texas mega data center sending the NDX down 2% and the SPX to 6800 before a
6827 close. The whole AI data center saga is starting to remind me of
China's "ghost city" fiasco several years ago where developers were encouraged
to overbuild to bolster growth in GDP. With a President who is a former
R/E developer, can the same thing occur in the US? AI infrastructure
suppliers such as NVDA and AVGO continue to show strong profits, but users such
as ORCL and CRWV fail to show incremental profits.
The move from the Mag7 to cyclicals seems to going as expected as the DJIA
and RUT made new highs last week, while the NDX missed by about 1% and the SPX
by a few pts.. It's interesting that the public which mainly follows the DJIA is
piling into stocks at record levels much like early 2000. Overall bearish
sentiment for the week improved from a weak to strong Sell to a neutral to weak
Sell.
Next week is interesting because we finally start to get economic data
delayed due to the shutdown with the Nov jobs data on Tues and the CPI report on
Thur. The jobs data is expect to show continued weakness with about 50k
jobs added and a increase in the unempl rate to 4.5%. The CPI is expected
to remain the same as 3%/yr and 0.3%/mn. Several Fed heads will be
speaking with S. "Trump" Miran Mon AM. Also triple witch is Fri.
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 below neutral.
Update Alt EMA. Bearish sentiment remains 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 rose above neutral to near a weak Buy.
Update EMA. Bearish sentiment rose above neutral to near a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment rose
from a weak Sell to neutral.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge
Spread (52%) 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 from near a strong Sell to a weak Sell.
Update FOMO-calls. Bearish sentiment rose from a strong Sell back toward
neutral, note the Feb top was neutral.
Bonds (TNX). Bearish sentiment remains at low extremes.
Rates dropped initally after the Fed cut but rose to unchanged by EOW, so much
for cutting rates to help housing.
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 increased sharply above a strong Buy with huge
DUST $ volume Thur.
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 also 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 declined back toward 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 declined back to a weak Sell with a sharp decline 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 to near a weak Sell with a reversal of the SDS/SSO
ratio and a sharp decline 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
Dec 19. 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. Note multiply OI$ by 100 for shares/contract.
With Fri close at SPX 6827, options OI for Mon is moderate with put support at
6800 and call resistance at 6900 and slight bullish bias with a 6840 $OI B/E.
Wed has smaller SPX OI with a slight negative bias from a 6825 B/E and same
support/resistance .
For Fri AM strong SPX OI shows a lower B/E at 6785 but the huge straddle at 7K
will likely limit downside.
For Fri PM moderate/strong SPX OI shows a more positive bias with a relative
large straddle at 6850. Bias M/W/F is a tight range around 6825-75.
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 remains positive at + .5 SD, NQ
(NDX) remains ar a strong Sell near -2.25 SD, YM (DJIA) increased toward a weak
Buy at +.75 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. More of the move from big tech to the cyclicals is
expected thru the EOY with a mostly rangebound SPX. SPX options OI is
indicating a range from about 6800 to 6900 with closes likely in the 6825-75
area. Surprises in the jobs data or CPI may extend the range either way.
Several months ago I indicated that Q4 jobs would likely be skewed to the
downside due to the summer gov't jobs layoffs who were still paid for 90 days
and are not officially "unemployed" while being paid. A reversal in the
jobs outlook in early 2026 could reverse the Feds dovish outllook.
Weekly Trade Alert. Could be a boring week with SPX rangebound from
6800-6900 and closes in the middle of the range. Updates @mrktsignals.
