If I stand on my head, I can almost call last week a good call, but in
reality my timing was way off. With only a mild pullback to start the week
to SPX 6100 (target 6050-75), a mild rally thru Wed PM pushed the SPX to a new
ATH at 6147 (target 6125-50 by EOW). However, WMTs negative EPS outlook
Thur AM and a 5% opening drop set a negative tone for the markets and the SPX skidded
below 6100 before a late recovery. The SPX continued to drop to
about 6075 by mid-AM before a stagflation outlook hit the news with the services
PMI (70% of the economy) dropped into contraction (below 50%) for the first time
in 2 years, while manufacturing expanded (20% of economy), but the killer was the UMich
sentiment outlook where the 5 year inflation outlook jumped to the highest level
since 2023. With the close for SPX at 6013, we are now 50% of the way to
my mid/late Mar target of SPX 5850 or lower to fill the mid-Jan gap, but I do
not expect a straight line decline. SPX options OI and NVDA EPS the 26th could
first push the SPX back to 6075 or higher next week.
ST Composite and VIX call indicators remain near neutral with the biggest
change in sentiment being a sharp drop in the SPX 2x ETF sentiment (INT/LT) with
strong buying in SSO last week. Other INT/LT sentiment indicators remain
between a weak and strong Sell. The NAIIM active manager exposure index showed a
sharp jump from 76% (below avg) to 91% (above avg) with 100+ a strong Sell.
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 continued to fall to a weak Sell.
Update Alt EMA. Bearish sentiment fell well below the weak Sell on Wed, but
bounced back to a weak Sell by EOW.
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 but remains positive.
Update EMA. Bearish sentiment fell to neutral mid-week then bounced.
The ST VIX calls and SPXADP indicator bearish sentiment fell below neutral,
but bounced back.
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 below a weak Sell.
Update FOMO calls. Bearish sentiment remains near neutral.
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 declined slightly.
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 near the weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment improved slightly but remains below 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 saw a sharp
decline from a combination of options and high SSO volume on Wed.
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 dropped nearer to 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 dropped below 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 Feb 28. 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 6013, options OI for Mon is moderate with high P/Cs.
Very strong put support around 6000 should provide a good bottom and may launch
a rally toward 6050 by EOD.
Wed has smaller OI with SPX having a large put position at 6050 and a move
higher could reach 6075+.
For Fri stronger SPX OI has stronger call resistance at 6100/+ with a target of
6075-100 .
Using the GDX as a gold miner proxy closing at 40.8 reached 42+ Thur at the
strong call resistance with a most likely range of 37.5-40.5 an extended range of
37-42.
Currently the TLT is 89.6 with the TNX at 4.42%, strong put support at 87.5 and
call resistance at 91.5 and BE 89.5 indicate a fairly narrow range (TNX 4.2-4.6%)
is likely.
Currently the IBIT is 53.9 with the BTC at $96k, B at 55 (BTC 98k) may limit
upside with 54 good 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
at neutral -0.20 SD, NQ (NDX) bearish sentiment declined to a weak Sell at -1.25 SD, YM (DJIA)
is neutral at -0.15 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. One month into the Trump 2 Presidency and it already
seems as if the world has been turned upside down, but we probably won't know
until 3 to 6 months what the effects will be. I hoped Trump noticed what
happened to Argentinas crypto token, the Libra, which crashed 94% in 11 hrs on
insider selling; the President who supported its issuance now faces impeachment.
Although Fri seemed like the beginning of the end, the SPX showed similar
behavior in Dec with the Feds hawkish turn and the Jan CPI surprise.
Weekly Trade Alert. Strong SPX put support and HVDA EPS on Wed
should propel at least a 50% retracement next week (SPX 6075-100). Mar
jobs, CPI, and FOMC (7th, 12th and 18-19th) could be impt inflections. Updates @mrktsignals.
Last week went as well as expected with two positive surprises from Trump
Wed. To start the week the SPX rallied to the top of the target range for
SPX of 5975 to 6075 with highs Mon and Tue of 6073 and 6076 before the expected
drop Wed for the CPI which came in hotter than everyone else expected at 0.5%/mn
and 3%+/yr. The Wed target was 5975-6000 before a bounce and the actual
low was 6003 before the expected bounce. The two Trump surprises, delaying
the broader implementation of tarriffs with Eurpoe and later positive news on
peace negotiations with Putin over Ukraine, turbocharged the bounce and extended
it thru Fri with a retest of the ATHs near SPX 6125 and NDX 22.1k.
The biggest surprise for me, which may have been the real reason for the rally, was
that LT int rates fell sharply after the stronger than expt PPI on Thur with the
TNX rising 0.1% Wed on the CPI then falling 0.2% Thur & Fri to close below 4.5%.
The weak retail sales helped, but a similar dropoff was seen last Jan due to bad
weather and may prove temporary. I had been expecting higher stock prices
and lower rates after Q1 due a tariff-induced slowdown, but if rates fall
sooner, stocks may continue to rally.
Sentiment remains mixed with the NAAIM active
manager index dropping 10 pts to 76%, 10 pts below the avg level of Q4
2024..
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 from near neutral to near a
weak Sell.
Update Alt EMA. Bearish sentiment fell from near neutral to below 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 declined, but remains near a weak Buy.
Update EMA. Bearish sentiment declined below 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 (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 moved to half way between a weak and Strong
Sell.
Update FOMO Call Indicator remains near neutral.
Bonds (TNX). Bearish sentiment remains at extreme lows and
declined slightly.
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.
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 back to a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose early in the week then fell back to
in between the weak and strong Sells.
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 from a
weak Buy halfway to 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 is little changed.
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 near 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 Feb 21. 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 6115, options OI for Tue (Mon is Pres Day holiday) is
moderate with balanced P/C, but 10x call OI$ that could push prices below 6100.
Wed has much the same OI where SPX has about 10% of calls at 6075 and will
likely test that level.
For Fri AM strong OI shows strong call resistance at/over SPX 6100 and is likely
to keep prices below that level.
For Fri PM moderate SPX OI has mostly far OTM puts with ITM calls down to 5800,
but over 6100 there is little resistance until 6150, so a strong finish is
possible EOW.
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
at neutral -0.25 SD, NQ (NDX) bearish sentiment declined to between a weak and strong Sell at -1.5 SD, YM (DJIA)
is neutral at -0.35 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Sentiment remains somewhat mixed with the ST Composite
remaining on a weak Buy while the VIX Call indicator and call FOMO are neutral.
INT/LT int rates (TNX) are a wild card and lower rates are a positive.
Some pullback thru mid-week looks likely with late week strength.
Weekly Trade Alert. SPX options OI indicate a drop to SPX 6050-75
is possible by mid-week, with a move to ATHs (6125-50) more likely at EOW Updates @mrktsignals.
Markets continued their selloff on Mon following the SPX 80 pt drop Fri
afternoon after Trump announced 25% tariffs on Canada & Mexico, and after the
1st hr the SPX was down another 100 pts from the Fri high at 6121 to the Mon low
at 5924. However, the BTFDers remained strong and Mexico giving in to Trumps
demands followed by Canada on Tue led to a lower high at SPX 6101 Fri before
getting knocked down again to 6025 on news of the inflation expt of 4%+ in the UMich
sentiment survey. Many of the sentiment indicators have moved to a
more neutral stance and the ST Composite has even moved to a weak Buy, so some
consolidation (SPX 5975-6075) seems likely. The biggest risk next looks to
be the Wed CPI report where options OI is indicating a target of 5975-6000 then
a bounce into Fri. The Hedge spread remains between the weak and strong
Sells, so volatility is likely to continue.
Other sentiment sources are equally divided with
retail investors jumping into the market with near record stock buying going
back to the late 1990s and sending volume soaring, while the
NAAIIM active manager index has risen to the
average of 2024 Q4s level, and the AAII Sentiment survey is showing a 1 year
high in bearish sentiment.
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 moved up above the weak Sell, but
remains below neutral.
Update Alt EMA. Bearish sentiment moved up above the weak Sell,
but 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 moved up sharply mid-week above a weak Buy.
Update EMA. Bearish sentiment moved up sharply mid-week above 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 (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 modestly but remains on a weak Sell.
Bonds (TNX). Bearish sentiment remains at low extremes as rates
(TNX) pulled back tp 4.4% before bouncing with Fri inflation expt.
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 is mostly unchanged with the ETFs near 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 continued to rise to near neutral.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment remains in between a weak and strong
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 has recently seen
a sharp rise due to the lower options volume adjusted for SPX volume. This
is actually due to an increase in shares traded due to the increase in share
purchases by the retail sector. More below.
Looking at the raw SMA for relative options volume shows the sharp drop in
options as the SPX volume is up to about 150% ov avg daily volume. The same
pattern was observed after the Oct 2021 pullback about 3 mns before the Jan 2022
top. However, this time the P/C ratio is much lower and may mean higher
risk.
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 toward 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 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 Feb 14 & EOM. 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 6025, options OI for Mon is moderate with strong P/C
support but even for $ P/C due to large quantity of OTM puts around 5900.
While everyone seems to be expecting a repeat of the last two Mon, a higher
close is likely with BE at 6035.
Wed has small SPX OI with CPI coming out. Here everyone seems to be
expecting a drop in CPI. but watch for something like the UMich expectations
(higher CPI). Large straddles at 5950 and 6000 give a negative bias and
SPX could reach BE at 5975 or lower.
For Fri moderate SPX OI show relatively strong put support and a week with no
new tariffs could send prices back to the 6040-50 area.
For Fri 28th EOM strong SPX OI is somewhat interesting with the steepest
support/resistance levels converging on the 6000-6100 range with a slightly
lower bias toward 6000-25.
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
at neutral -0.25 SD, NQ (NDX) bearish sentiment is back to a strong Sell at -2.0 SD, YM (DJIA)
is neutral at -0.25 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Time for the superbowl indicator with a win for Philly
bullish and KC bearish, what's one more indicator. Everyone seemed to
forget the volatility during Trump one with the numerous on again off again,
somewhat outlandish proposals by POTUS. The idea of tariffs does not seem
that absurd when you look at the history of the US as the govt was supported
solely by tariffs from 1790-1913 when the Fed Reserve was created and income
taxes were added and after WW2 tariffs were almost eliminated, but income taxes
were raised as high as 60%. Both instances seemed likely to help Europe
recover from WWs, but that was long ago.
Trump Gaza has been discussed for
decades as a means to develop an alt to the Suez canal controlled by the sometimes
unfriendly Egypt and Greenland is the last stop between Russia and CA/US.
BTCers seem to be getting nervous with the recent decline below $100k after
Trump failed to mention BTC as an option for his sovereign wealth fund and
instead proposed Tik Tok.
Weekly Trade Alert. ST sentiment is slightly positive an may help
markets to a positive start for the week, but Wed CPI report is likely to
disappoint and send the SPX back below 6k (target 5975) followed by a
turnaround into Fri. Updates @mrktsignals.
