Two weeks ago I pointed out that May 19 SPX options Oi was pointing
to higher levels and that a huge straddle at 6000 could be a point of
attraction and last week that a China resolution could push prices to 5850.
As it turned out a weekend trade meeting resulted with a 90 day pause of most of
the tariffs with hopes of a resolution and that was enough for a Mon open at SPX
5850 and momentum carried thru the week with a close over 5950.
Admittedly, I wasn't expecting so much for so little, but a positive
outcome was expected thru last week.
The huge gains were enough to push many of the sentiment indicators back to
levels seen near the Jan-Feb highs although several weeks may be needed before a
turn. The late May 29 Bradley turn date (+/- week) could be of some
significance. The ST Composite remains near neutral as the NYSE Adv/Dec
volume remains strong, while options call FOMO and hedge spread are pushing the
ST/INT Composite to levels near the Jan-Feb top, so gains are likely to be
limited with an increase in volatility.
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 reaching the
weak Sell level.
Update Alt EMA. Bearish sentiment also continued to decline
reaching the weak Sell level.
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 near neutral.
Update EMA. Bearish sentiment remains near neutral.
The ST VIX calls and SPXADP indicator bearish sentiment moved higher, now
above a weak Sell.
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 sharply with both hedge spread and fomo
calls declining and is now at a strong Sell with LT (blu) lagging.
Update FOMO-calls. Bearish sentiment retreated back to a weak Sell.
Bonds (TNX). Bearish sentiment fell back to levels seen just
before the last run from 3.5% to 4.8%.
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 fell below a weak Buy as prices dropped 10%,
likely a negative due to BTFD.
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 fall, nearing the levels of the
Jan-Feb highs.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment fell to the weakest levels ST (grn)
since Nov 2021. Another INT top is likely over the next 2-3 weeks.
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 above
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 continued to drop, now below 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 is also 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 May 21 & 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 June 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 5958, options OI for Mon is small with strong call
resistance at 6000 and some resistance to 5900. Negative bias to 5900.
Wed has very small SPX OI with a similar bias to 5900 or lower.
For Fri SPX OI is moderate with strong put support at 5875 and 5900 with
negative bias from ITM calls, overall 5900-25 is likely.
For Fri EOM stronger SPX OI shows strong call resistance at 6000 and put support
at 5900 and 5925. ITM calls are negative with a target overall of 5900-25.
Using the GDX as a gold miner proxy closing at 46.3 and options Oi showing a
negative bias toward 44 from ITM calls.
Currently the TLT is 86.3 with the TNX at 4.44%, TLT OI shows little bias with
ITM puts offsetting larger call positions.
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 remains positive at 0.25 SD, NQ (NDX) bearish sentiment remains at a weak Sell at
-1.00 SD, YM (DJIA) is slightly negative at -0.25 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. It's unfortunate that much of the stock market's
actions so far this year have been driven by Trumps on-again, off-again policies
which make forecasting impossible. However, extremes in sentiment seem to
find a way of reversing market direction, and we are rapidly approaching an extreme
seen before a reversal downward.
Weekly Trade Alert. Some weakness seems likely early in the weak
with strength later on. Range SPX 5875-900 to 6000 possible. Updates @mrktsignals.
No comments:
Post a Comment