Humpty Dumpty Sat on a Wall

So last week turned out to be a reverse image of the previous week with a sharp decline Mon from WS hysteria over Trumps "you are fired" threat to the Fed's chair the previous week with another flip-flop and a strong rally the rest of the week, blaming media misinterpretation.  Trumps policy positions, including tariffs, are beginning to look like a Spanish soap opera and is not likely to generate a lot of confidence in foreign trade partners to "make a deal".  If we make it thru the 90 day tariff grace period and everyone decides to wait to see what the "real deal" actually is, Trump is likely to explode.  On the markets, I seemed to be the only one expecting the SPX to rally with a 5480-5520 target, but now that the "triangle" was broken thru to the upside every one has turned bullish.  Well not everyone, Pretlzel Logic views SPX 5500-600 as important resistance and Springhell Jack sees a H&S potential for the SPX with major risk from weakness in the US dollar and bonds.  The USDEUR is down 15% this year even with EU economies in recession due to EUs stronger fiscal discipline and 100B euro purchase of US bonds in Jan is now worth 85B euros, now thats a tariff.

Several of the important ST/INT indicators are warning of trouble ahead including the VIX call indicator, the FOMO call indicator and hedge spread, but a two to three week topping pattern is possible.  Many have noted the strong breath on many of the recent rallies which have also given a positive bias to the ST Composite, but given the fact that most of the moves are "news driven" (Trumps reversals), it seems like most of the buying may be short covering as shorts are caught of guard.

SPX options are showing a slight positive bias thru Wed (EOM) toward 5540-50, while Fri (Apr jobs) are not showing call resistance until 5600 and support at 5500, but I am not expecting any major surpriise.

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 retreated to below neutral and remains weak compared to the 2022 bear market.

Update Alt EMA. Bearish sentiment moved closer to neutral or below.

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 saw a sharp drop back to neutral.

Update EMA. Bearish sentiment rose slightly but remains below a weak Buy.

The ST VIX calls and SPXADP indicator bearish sentiment saw a very sharp drop moving from above neutral to below the weak Sell, very similar to the Mar 2022 bear market rally.

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 further down from neutral, now near a weak Sell.

FOMO calls. Bearish sentiment saw a very sharp drop with excessive call buying and moved from a weak Buy to well below a weak Sell.

Bonds (TNX).  Bearish sentiment remains at extremely low levels.  Springhell Jack thinks a bond panic could send the TNX to 8-9% this year.

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 continues to rise and may support prices.

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 below neutral.

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment dropped sharply below neutral with the last several weeks sentiment very similar to Feb-Mar 2022.

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 slightly, but remains positive.

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 back to negative with a decline led by 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 below neutral from just below a weak Buy.

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 May 2. 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 5525, options OI for Mon is very small with put support down at 5400 and call resistance at 5560.

Wed EOM has large SPX OI where put support is at 5500 and call resistance at 5600 and a slight positive bias to 5540.

For Fri strong SPX call resistance at 5600+ should limit rallies, while disappointing jobs numbers (strong) could result in a move to 5500 or less.

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) bearish sentiment moved to positive at 0.25 SD, NQ (NDX) bearish sentiment remains at a weak Sell at -1.25 SD, YM (DJIA) is neutral at 0.0 SD.

Click dropdown list to select from the following options:

Tech / Other History
2025
   04.19 An SPX 2022 bear market analog and an update of the LT NAAIM Index.    04.12 How golbalism has effected foreign purchases of US debt since 1980.    04.05 A comparison to SPX 2020 covid crash and a look at LT NAAIM Index.    03.29 Corporate profits to GDP since 1980 show strong growth from globalism.    03.22 A comparison to Trump 1.0 trade war results for the SPX.    03.15 Update of Technical Indicator Composite & SKEW plus VIX term structure.    01.25 Update of NYSE Adv/Dec volume now at Sell level & SKEW shows warning of INT top (1-3mns).
2024
   12.15 Comparison of NYSE Adv/Dec volume lows to peaks in SKEW shows ST (1 month) warning of INT tops.    12.06 High peaks in SKEW since 2018 have been early warning of INT tops as sign of "max" options bearishness.    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 rally may continue for a few weeks, but upside is probably limited to SPX 5600-700.  I am constantly watching both the USD and TNX for potential problems with the TNX sandwitched between 50,100&200 SMAs, while USD has broken below 100 and shows no sign of recovering.  The most important chart may be the USDJPY which looks like a dbl-top H&S with lower values negatively effecting the yen carry trade which caused a sharp decline last summer. How long can the BOJ keep rates at 0.5% when inflation is 3%?

Weekly Trade Alert.  Some positive bias ST.  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

© 2025 SentimentSignals.blogspot.com