In the Land of Oz, Follow the Yellow Brick Road (Gold)

Last week was expected to see a continuation of the relief rally from Trumps 90 day stay on reciprocal tariffs for everybody but China (at least until he changed his mind) while trade negotiations continued.  The monthly SPX options exp OI supported a move to 5500+ and the week started strong with a move to SPX 5450, but another shocker appeared Wed when Trump sited national security risk to prevent the sale of the lower end (H20) NVDA AI modules to China.  This dragged down the tech sector with NVDA falling 10%+, and Thur weaker EPS guidance (-10%) by UnitedHealth caused the stock to fall 20% and shaved almost 800 pts off the DJIA. 

For the week Pretzel Logics triangle was the clear winner with the lows at SPX 5225 completing his "d wave" with a move to 4600-4700 expected after "e wave" up is completed.  However, I still think a test of last weeks high at SPX 5481 (5480-5520) is possible (red declining line) to clear bearish sentiment before a larger decline (odds at 50/50).  One possible reason was announcement of a "letter of intent" between the US and Ukraine on a rare earth minerals deal late Thur.  The Tech/Other section looks at this possibility comparing sentiment from the Rydex Bear/Bull 3x fund ratio to the 2022 bear market (Feb) with the 4th wave triangle of wave A down.  An update of the LT NAAIM index also shows a 20 pt drop to similar levels as Feb 2022.

Sentiment remains modestly positive overall, but near-term market direction can remain at the whim of Trumps directives.  Ie, was the NVDA action a reciprocal action to Chinas export limits on rare earth minerals or a response to competition from the DeepSeek software?  Similar actions with other companies will be a negative, but other developments such as the Ukraine minerals deal can be a positive.  With buyers front-running the tariffs, Q1I sales, EPS and GDP may be stronger than expected for the short-term.

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 rose to in-between the weak and strong Buys.

Update Alt EMA. Bearish sentiment remains positive but below a weak Buy.

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 remains in-between weak and strong Buys.

Update EMA. Bearish sentiment is below a weak Buy.

The ST VIX calls and SPXADP indicator remains at 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 is close to neutral.

Bonds (TNX).  Bearish sentiment remains at low extremes.  The gap at 4.270% may have been filled with a drop to 4.725%.  Trader Joe did a LT chart of TNX from 2020 last week showing a 2 yr triangle with an upside target of 5.5% or higher. 

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 as prices move higher and could mean more upside.

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 retreating to neutral.

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment retreated slightly.

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 increased slightly to .5 SD.

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 Buy.

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 retreated to 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 Apr 25. 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 5283, options OI for Mon is small with put support up to 5300, but could move higher with call resistance in the mid 5450s.

Wed has smaller OI where SPX has put support up to 5500.

For Fri strong put OI could result in strong positive delta hedging but no targets are seen.

For EOM Wed Apr30 stronger OI, esp puts, show strong put support up to 5500 and could push prices toward SPX 5500 or higher.

Using the GDX as a gold miner proxy closing at 50.9, could see positive delta hedging over 50, but below 50 support is 47-8.

Currently the TLT is 87.5 with the TNX at 4.33%, 87-91 is essentially neutral due top straddles.  Support is 85 and resistance 92

IV. Technical / Other

Last week the Rydex 3x ETF Bear/Bull Ratio reached the Buy level matching the level of the Jan 2022 lows which could indicate that the SPX could be in a long and painful period as it took twice as long and twice a % drop in 2025 as in 2022.  The next chart shows details for 2022.

In 2022, the first wave down (A) was 5 waves with a small triangle (T1) comparable to the current triangle in 2025.  Interesting, the SPX ATH in 2022 was 4819, 20 pts below the recent low early Apr, and the projections of the current triangle breakdown at 4600-700 are very similar to the Mar 2022 top.  In 2022, the triangle did see a fake breakout at 4595 (dbl top) before the 5th wave down started, so I am giving a 50/50 chance of a test of 5480+ before a larger decline.  As noted the wave 5 could also see a bottoming triangle.

The NAAIM weekly active managers exposure index had risen from 49% to 57% two weeks ago after the Trump tariff reprieve, but last week fell 22 pts to a low of 35 very similar to the low of Feb 2022 supporting the idea of a near term bounce.

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 remains neutral at -0.0 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.  Triangles everywhere, but which way to go.  The outlook for the coming week is non-committal.  It's possible to just go sideways, but the EOM SPX options OI is showing another strong possibility of a move toward SPX 5500 and a late week deal with Ukraine could be the catalyst.  For some reason the Mar CPI (Apr 10) seems to have been overlooked, but the monthly was -0.1% and 2.4% annual.  With FOMC date May 6-7 and June 17-18, two more low CPIs could be close to 2% by June and lead to a softer tone from Powell.  Could also coincide with market lows if Trump does not get what he wants from negotiations or bond vigilantes revolt.

Weekly Trade Alert.  If triangle breakdown not imminent this week, next week could see a fake breakout to the upside.  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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