Will NVDA Break the Range?

Last week was another wild week driven by several important news events.  Tue saw a continuaton of the AI displacement scare driving the SPX to a new low for the month at 6776 which seemed to put the weekly target of SPX 6900-50 in jeopardy, but a late BTFD rally pushed prices up for a positive close.  The rally continued into Wed afternoon to over SPX 6900 before news of a collapse of the US led Russia/Ukraine peace talks sent oil up 5% on fears of more sanctions on Russian oil and stocks gave up half of their gains.  Weakness continued Thur and early Fri on threats of an imminent US attack on Iran until the SCOTUS made a surprise announcement (expt next week) of the Trump tariff ruling, rejecting all of the IEEPA tariffs.  A relief rally pushed the indices higher, with the SPX closing just over 6900 at 6910.  M.Armstrong had a good summary of the alt tariffs regs likely to be used by Trump.  Other news Fri which had a muted reaction were the 2025 Q1 GDP dropping to a 1.4% ann rate due to the govt shutdown and the Jan core PCE inflation which rose to 0.4%/mn or 3% ann rate.  Since the core PCE is the "official" rate used by the Fed, the outlook for lower rates diminished with the CME fed fund futures dropping from a 70% prob to just over 50% for a June cut of .0.25%

ExecSpec had an interesting outlook for the AI displacement as a general threat to information processing industries (where most of the growth has come from the last twenty years), while industrial and construction are less threatened (at least until AI robots become common).  For the week, however, the techs (NDX) led the rally as supported by sentiment with about a 2% gain, while the DJIA (banks) were flat and the SPX gained over 1%.  Last weeks RIME prices should have been $1.00 to 6.00, not $100 to 600.

Modest drops in bearish sentiment were seen last week as the ST Composite dropped below a weak Buy and the ST VIX call indicator and FOMO Calls dropped to near/at weak Sells.  The INT DM/SM indicator also dropped to a weak Sell.  Interestingly, the SPX options OI this week is showing a BE range of 6900-20, indicating a tight range is likely (+/-50) or SPX 6860-6960.  An attack on Iran is a wildcard that could cause a move to SPX 6700.

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 slightly above a weak Sell.

Update Alt EMA. Bearish sentiment rose slightly 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 declined from a weak Buy.

Update EMA. Bearish sentiment declined from a weak Buy.

The ST VIX calls and SPXADP indicator bearish sentiment remains just above 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 moved lower between neutral and a weak Sell.

Update FOMO calls. Bearish sentiment dropped to a weak Sell.

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 continues to hold above 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 dropped to a weak Sell VST (grn).

With the sister options Hedge Spread as a ST/INT indicator (outlook 1-3 mns), bearish sentiment remains near 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 dropped below 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 rose slightly above 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 continued to rise slightly.

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 27. 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 6910, options OI for Mon is small/moderate with a slightly lower BE at 6900 due to ITM puts.  Call resistance is 7k.  Possible range 6850-6950.

Wed SPX options OI is small with put support from 6890-6915 and call resistance 6950+.  Possible range 6900-75

Fri SPX options OI is large with put support up to 6900 and strong call resistance at 7k.  Likely close 6925-50.

Fri Mar 20 PM SPX options OI is small/moderate with put support at 6900 and call resistance at 7k.

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 rose above neutral to + 0.5 SD, NQ (NDX) fell below a weak Sell at -1.25 SD, YM (DJIA) remains neutral at  0.0 SD.   A quick look at gold (GC), bearish sentiment is in-between a weak and strong Sell at -1.5 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.   The SPX has remained in a trading range of about 5% from 6700 to 7000 for 3 months now and reminds me of mid-2015 when the SPX also traded in a 5% range for several months (2030-2130) following a dynamic rally after a "bird flu" scare.  In that case the "rounded top" lasted almost as long as the rally did, so it still could be several months before the bears get any satisfaction.  I have been watching NVDA, but it is stuck in the middle of the 170-196 range and new highs in SPX are unlikely unless a breakout toward the 212 ATH is seen.  NVDA EPS Wed.

Weekly Trade Alert.  More trading range expected, mid 6800 to mid 6900.  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

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