Last weeks pullback was not totally unexpected as a pullback to SPX 7500ish
was the SPX OI target for Fri. The depth of the pullback in the NDX
(almost 5%) was not expected and helped pull the SPX down 3% on Fri to close near
7380. The tech selloff in the US did, however, mirror the S.Korea
KOSPI Index which is dominated by
Samsung and SK Hynix (memory chips). The KOSPI nas doubled over the last 6
mns from 4k+ to 8k+ similar to the NDX in late 1999, and was down 5.5% by the close Fri (US 2 AM
ET) and might serve as a leading indicator for US techs.
An interesting setup has shown up in the SPX options for the next two weeks for
an ABC decline of about 5% from the 7620 high (just shy of the lower 7650-7720
target). With last weeks decline wave A, next week may see a rally to SPX
7500-50 for wave B, before a C wave the following week to 7200-50. The
selling last week may have been a clearing of inventory to free up cash for the
SpaceX IPO on June 12 that could prop up prices next week. A final flush
the final week may be all that is needed to get Trump to serve TACOs for a final
Iran deal where Iran is seeking a $24B freeing of frozen assets with half as a
good faith gesture.
Sentiment was mostly mixed for the week with most of the selling on Fri.
The ST Composite moved from below a weak Buy to above, while INT/LT indicators
such as DM/SM, hedge spread and SPX & NDX ETF & ETF optioins showed a decrease
in bearish sentiment. Both ES and YM futures bearish sentiment increased
to a weak Buy.
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 decreased for the week and remains
in between neutral and a weak Sell.
Update Alt EMA. Bearish sentiment decreased for the week toward 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 rose back above a weak Buy.
Update EMA. Bearish sentiment rose above a weak Buy VST (grn).
The ST VIX calls and SPXADP indicator bearish sentiment remained between neutral
and 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 rose back above a strong Sell.
Update FOMO calls. Bearish sentiment rose back to a weak Sell.
Bonds (TNX). Bearish sentiment remains near extreme lows.
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 toward a weak Sell as the HUI has fallen
about 2/3 of the expected retracement to ~500.
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 closer to a strong Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment increased slightly toward 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 fell 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 fell back toward 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 fell to 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 June 12. 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 7384, options OI for Mon is moderate with a positive bias
toward 7500 put support.
Wed SOXhas smaller OI where SPX also has a positive bias toward 7500.
For Fri moderate SPX OI has a positive bias toward 7500-50 with little call
resistance until 7600.
For Thur AM June 18 (19th is holiday) very strong SPX OI is showing a very
negative bias toward the 1st put support at 7200 due to the huge straddle at 7k
(~330k p&c).
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
increased to a weak Buy at + 1.5 SD, NQ (NDX)
is positive at +0.5
SD, YM (DJIA) increased to a weak Buy at + 1.5 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. It's interesting to note that the strength in the US
jobs market which was blamed for the selloff in US stocks on Fri may be an
indirect result of Trumps .(anti-) immigration policy. Many of the
illegals were hired in areas such as construction and warehousing and were paid
under the table, and less illegals means more legitimate hires which seems to be
more than offsetting losses from AI replacements. Obviously, this makes it
harder for the new Fed head to lower rates.
Weekly Trade Alert. Possible to see SPX 7500-50 for the June 12
SpaceX IPO, then a flush for optns exp week thru June 18.. Updates @mrktsignals.
