Last week ended up much stronger than expected on the back of a handful of
stocks. The overall outlook was for a pullback to SPX 7000-50 for Thur/Fri where a
tug of war was expected between oil prices and earnings. Oil prices
(WTI/bbl) began the week with a $10 rise after Iran talks stalled, but could
only push the SPX down to the 7100 level based on strength of NVDAs 4% rise as
8% of the SPX. Thur saw a breakout to new ATHs for the SPX with 10% surges
in CAT and Alphabet (GOOGL+GOOG) on EPS results with Alphabet contributing about half the SPX gains
and CAT adding 500 pts to the DJIA (+82 pts/0.162 divisor). APPL added to
both indices on Fri pushing the SPX to 7270 before a late fade.
Overall sentiment is mostly unchanged with the ST Composite remaining
slightly positive with most indicators neutral to slightly negative.
Previously SPX 7200 had been given as a target for June due to the expected SpaceX
IPO and gains may be limited from here. The June SPX monthly exp still has
a 350k straddle at 7000 which supports a pullback to the 6900 level before exp
and is likely to act as a drag on higher prices.
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 declined slightly below neutral.
Update Alt EMA. Bearish sentiment declined slightly below neutral.
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 rose slightly toward a weak Buy.
Update EMA. Bearish sentiment fell slightly between a weak Buy and neutral.
The ST VIX calls and SPXADP indicator bearish sentiment continued to rise
over neutral as the SPXADP remains low.
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 rose sharply above a weak Sell as hedging
increased and call volume fell.
Update FOMO-calls. Bearish sentiment rose from a strong Sell to above 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 fell back to 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 slightly, remaining below a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment slightly above a weak Sell.
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 rose 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 for SPX also rose 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 May 8. 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 7230, options OI for Mon is moderate call resistance above
is small, but ITM calls may cause a negative bias toward 7150 to 7200.
Wed has small SPX OI where SPX has call resistance starting at 7275 and put
support at 7150.
For Fri moderate SPX OI has a low BE due to ITM calls at 6950, but 7150-7200 is
more likely.
For Fri June 18 AM (monthly) SPX has very strong OI with a very large straddle
at 7000.
There should be very strong pressure toward SPX 7000.
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 positive at + 0.3 SD, NQ (NDX)
rose to neutral at 0.0
SD, YM (DJIA) is 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
2026
2025
2024
2023
2022
Other Indicators
Conclusions. Comparison to the SPX 2017 low volume, meltup analog
continue as the "Trump believers" are willing to believe that "all problems will
eventually be solved". Continued strength in the AI sector despite rising
input prices and supply constraints provide a convenient mask for equity
strength. Recent information
indicates that the AI sector was responsible for 75% of the growth in 2026 Q1
GDP or 1.5% of the 2% GDP. Probqably a record concentration..
Weekly Trade Alert. No specific guidelines for this week.. Updates @mrktsignals.
