Last week was expected to rally to about 6900 if oil prices fell to $90-95/bbl (WTI)
or fall to 6750 if oil prices rose to $95-100, and extremes were seen at each
end. Sun started with news of a collapse of the Iran peace talks sending
oil futures up $12 to about $108 and ES futures indicated an SPX level of about
6750. But by Mon open, oil had stabalized and SPX opened down only to 6790, but
as oil prices fell thru the day back to $96 the SPX rallied to 6886. As
the week progressed Trump continued to tweet (or is it now X) that a deal was
very close, and as oil continued to drop the SPX rose, making an ATH Wed (>7k).
With Fri news that Iran opened passage thru the Strait of Hormuz, oil dropped an
additional $10 to about $82 pushing the SPX to a high around 7150. Today
we now have news of an Iranian gunboat attack on one of the tankers, so the
Strait is closed again. I think that the big problem now negotiating with
Iran may be that all of the strongest leaders were killed by US & Israel, and
the remaining militia is fractured into independent factions with no central
control to negotiate with.
The recent meltup has pushed many of the sentiment indicators to ST Sell
extremes. I had been looking for a move to SPX 6900-7100 by mid-June to
support the SpaceX IPO of about $75B ($1.5T value) and we are already there in 3
weeks. Now two of the major players OpenAI and Anthropic are expecting an IPO in
the Fall so there may be aditional upward pressure later in the year. In
the Tech/Other sector, I will look at two possible analogs for the rest of the
year, the 2007 rounded top and the 2018 Trump trade war with China, both support
a retest of recent lows (July-Aug) and another high in the Fall (Oct).
The INT/LT Composite has moved to a very ST Sell on EMA (grn), while the ST
Composite is back to neutral. The VIX call indicator has moved to a weak
Sell, while the ST/INT Composite (hedge spread, NYDNVol and FOMO calls) has
moved to an extreme strong Sell with FOMO call buying at decade highs. The dumb
money and hedge spread indicators have dropped to weak/strong Sells VST and the
SPX and NDX ETF and ETF option indicators have dropped from a strong Buy to
neutral. Even with all that I don't expect much more than a pullback before
June then a move to about SPX 7200. July-Aug could see another 10% decline to SPX
6500-600 possible with ground troops in Iran. Fall may see SPX 7400.
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 fell back to neutral.
Update Alt EMA. Bearish sentiment moved to neutral LT (blu) and weak Sell
VST (grn).
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 dropped to neutral.
Update EMA. Bearish sentiment dropped to neutral.
The ST VIX calls and SPXADP indicator bearish sentiment has dropped from a
strong Buy three weeks ago to 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 fell to an extreme low, strong Sell, due to
high FOMO call buying.
Update FOMO calls. Bearish sentiment fell to extreme lows beyond a strong
Sell.
Bonds (TNX). Bearish sentiment remains at extreme lows.
We may be entering a new inflation cycle.
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 remains near a weak Sell.
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 fell to a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment dropped sharply VST similar to the lift
off from the Apr 2025 lows, likely short covering.
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 near
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 dropped sharply from a strong Buy to 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 dropped sharply from a strong Buy to neutral.
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 20. 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 7126, options OI for Mon is moderate with strong call
resistance at 7050 and 7100. Below 7050 and 7100 could fall to 7000, but
above positive delta hedging may support prices.
Wed SPX OI is small with resistance below down to 6920 and above at 7150.
For Fri SPX OI is strong with call resistance down to 7050 and should see a
weekly close of 7050 or lower.
For Thur Apr 30, SPX OI is strong and similar to Fri call resistance down to
7000 should push prices to that level or lower. The calls at 6650 shown
last week were purchased Mar 31 and Apr 1 around $100/contract (3500+8500
contracts) and sold Apr 15 (6000 @ $390) and Apr 17 close (4000 @ 486) for
a nice profit of about $300M, looks like insider trading.
IV. Technical / Other
This week I mentioned the divergence between the SPX and ETF P/Cs, but after closer examination the
divergence appears to be more from increased call buying, especially 0DTE that is causing a lower trend.
The most interesting thing about this rally is the lack of volume support, where
many of the past correction lows started with 10 to 1 Adv to Dec volume, this
time 2 to 1 is more likely. The most similar year was 2017, Trumps 1st
year, so this is probably buying by the same people who bought Trump meme coins.
PhilsStockWorld thinks it is short covering.
Previously I had mentioned the parallels berween the rounded top in 2025-26 and
2007 and today I want to show the analog for what may happen in 2026. 1st
a Q1 decline the a sharp rally into June-July, a successful retest of the lows
in July-Aug and a high retest in Oct.
In 2018, a similar although with different timing occured during Trumps 1st
trade war with China with an alternation of the current vertical climb and
lengthy decline. The 2007 version seems more likely.
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 moved
to positive at + 0.5 SD, NQ (NDX) remains near a weak Sell at -0.5 SD, YM (DJIA)
is less positive at +
0.25 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
2024
2023
2022
Other Indicators
Conclusions. During Trumps first term I coined the adage
"Stockbroker in Chief" to describe Trumps manipulation of the stock market thru
claims of pie in the sky and a chicken in every pot, but last week was truly an
Oscar performance as he proclaimed that the failure of the Iran peace talks were
only one line away from the deal of the century. Sentiment is pointing to
a severe overbought condition, but it may be too early to discount Trumps
persuasiveness. WS is likely to try to keep markets afloat thru the Fall
when the combined IPOs of OpenAI and Anthropic are expected to rival that of
SpaceX The strong rallies last week in MSFT (+15%) and ORCL (+30%) seemed
to be the result of news
of expected data centers buildout problems due to lack of power. This
could be a big problem for the AI sector later this year..
Weekly Trade Alert. A pullback over the next two to three weeks is
expected, but the SPX may hold its lows near 6900. Updates @mrktsignals.
No comments:
Post a Comment