On the Fast Train to Nowhere

Last week was expected to show some early weakness due to the follow thru from MSFT high capex spending, but more of the same from GOOGL on Wed and AMZN on Thur continued to pressure prices until the Fri turnaround.  The outlook was for a recovery by Fri back toward the SPX 6950 area and from a Thur close of 6780 the SPX rose to a high of 6945 before a close at 6932 Fri.  The turnaround in the ES futures was even more dramatic with a Fri premarket low of 6750 and a high of 6965.  The culprit was a WS big bank call for a marlet bottom Fri AM.  Interestingly, this corresponds with the mysterious SPX straddle at 7000 that has been appearing at the monthly exp since Dec.  Apparently, the big banks (GS,JPM) are selling premium and when I first looked at Feb exp a couple of weeks ago when SPX was about 6975 there were about 100k ea for P&C at $128.  This works out to about $2.56B in premium.  The straddle makes money if the SPX is within 7000 +/- 256 for a low at 6744 which is almost exactly where the banks called a bottom.  It gets even better for Mar, where I just noticed that there is an SPX straddle at 7000 of 200k ea for P&C with P at $160 and C at $110 for $ 5.4B in premium.  This gives a BE range of SPX 7000 +/- 270, so the bottom is likely in for a while.

Overall, bearish sentiment improved somewhat, with the ST Composite remaining and several INT indicators moving above a weak Sell including the FOMO calls, Dumb Money and Hedge Spread, but a surprise from SCOTUS on tariffs is a possibility after the 20th when their recess ends.  The increased CapEx spending should be good news for NVDA which was up 8% on Fri.  Since Dec, NVDA has been trading in a range of 170-195 after a Nov high of 212 and ATHs may pull the SPX to ATHs as well.  Jobs data from Fri was delayed due to shutdown is now Wed AM and CPI is Fri AM.

For those that like to follow multiple markets, ie, commodities, stock indices, currencies, crypto, etc, I found a new site called TradingEconomics.com that has a handy setup .  The first couple of pages are news summaries, but below that is a mulit-columm view.  Just click on column heading to select, then use arrow keys to change.  Updates are continuous with low memory usage and crypto is 24/7.  US indices are SPX, DJIA, and NDX with Nikkei, FTSE and several others; all appear to be 1-mn futures real-time.  A couple pages below is a global economic summary.

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 dropped slighty but remains above a weak Sell.

Update Alt EMA. Bearish sentiment  remains just above 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 remains near a weak Buy.

Update EMA. Bearish sentiment remains near a weak Buy.

The ST VIX calls and SPXADP indicator bearish sentiment remains below neutral, but well short of a weak Sell.

The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (52%) 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 increased to neutral early then pulled back below neutral.

Update FOMO - calls. Bearish sentiment rose back toward neutral.

Bonds (TNX).  Bearish sentiment remains at low extremes.

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 topped out at +6 SD, but remains on a strong 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 rose above a weak Sell toward neutral.

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment jumped above a weak Sell to just below neutral.

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 moved 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 moved toward neutral.

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 moved up from 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 13 & Feb monthly. 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 6932, options OI for Mon is moderate with little bias between 6900 and 7000.  BE is 6905 due to deep ITM calls, but range is more likely 6900-6960.

Wed SPX options OI is small/moderate with put support at 6915.  Could reach 6950+ with jobs data release.

Fri SPX options OI is moderate/large with stronger put support.  Expected range 6925-75.

For Fri monthly AM, strong SPX OI show a strong positive bias with a BE at 6995, but strong call resistance at 7k.  May test ATH.

For Fri monthly PM, SPX OI is moderate with weak put support and strong call resistance at 7k.  Likely close 6900-50.

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 neutral + .2 SD, NQ (NDX) remains above a strong Sell at -1.5 SD, YM (DJIA) remains below neutral at  -0.1 SD.   A quick look at gold (GC) is just below strong Sell at -1.75 SD.

Click dropdown list to select from the following options:

Tech / Other History
2025
   12.27 A look at the China SSEC stock index vs gold for seven years.    09.27 LT NYSE Adv/Dec volume and Rydex 3x Bull/Bear indicators at levels of prior INT tops.    05.09 NAAIM LT and Rydex 3x Bull/Bear indicators approaching bulish extremes.    05.02 The strong breath Adv/Dec volume may not be all positive, aka late 2015.    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.  Its hard to believe that for all of the excitement last week provided, the SPX managed to lose only 7 points at the end.  The DJIA, however, had a tremendous week jumping over 50K for the first time after bumping into 49.6k six times since early Jan.  I was surprised to see that the DJIA (price weighted) is weighted heaviest by banks (27%) while techs are second (21%).  GS at $900+ is 11% while NVDA at a mere 180 is only 2%.  Last weeks ADP data seemed to be the first indication of AI-related job losses with a loss of over 100k, so the Wed jobs data may be important.  Bad may be good for lower rates, but that just makes it cheaper to buy more AI that leads to bigger job losses.  How can the Fed fix that?  CPI on Fri is expect to show a slight decline, but higher oil prices remain a threat.

Weekly Trade Alert.  SPX likely to be on hold between 6900-6975 unless there is a major surprise.  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