Saturday, May 17, 2025

Help, We Need a Matador!

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.

Investment DiaryIndicator 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

No comments:

Post a Comment