Last weeks outcome was mostly as expected with limited upside in
the SPX 6050-7000 area except for a Wed selloff which may have been a
combination fo profit taking from the test of 7000 (6985) and a reaction to
China's decision to limit imports of the NVDA H200 GPUs since most of the
selling was in the NDX. However, after an SPX 100 pt pullback, Thur
rallied back to 6980 before a late fade Fri to 6940.
Things may get interesting for a week or two late Jan/early Feb with the
Bradley turn date Jan 19th. Both the ST VIX call indicator and Hedge
Spread moved to weak Sells, while the ST/INT Composite and FOMO call indicator
remain between a weak and strong Sell. SPX options OI is also showing a
change from recent patterns as the EOM has very little OI at the SPX 7000 level,
but then strong OI returns for the Feb 20 monthly AM OI. This seems to
indicate an unfavorable SCOTUS ruling on tariffs that could see a 3-5% pullback
(SPX 6750-6850), but a return to 6900+ by Feb 20.
Last weeks reference was in error regarding the timing of the US invasion of
Iraq, after further thought I realized it was Oct 2002 a year after Sept 11,
2001 event.
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 continues to hover just above a weak
Sell.
Update Alt EMA. Bearish sentiment continues to hover 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 rose back above neutral.
Update EMA. Bearish sentiment rose back above neutral.
The ST VIX calls and SPXADP indicator bearish sentiment fell to a weak Sell
similar to before the Nov pullback.
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 is slightly lower beneath a weak Sell.
Update FOMO Calls. Bearish sentiment remains in-between a weak and strong
Sell.
Bonds (TNX). Bearish sentiment remains at low extremes, but
rates broke above the 4.2% resistance level on news that Trump was likely to
favor K.Warsh over K.Hassett for new Fed chair.
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 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 increased slightly below a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment fell to a weak Sell VST (grn).
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 rose back over a
weak Sell.
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 remains below 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 rose slightly toward 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 Jan 23 & EOM. 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 6940, markets are closed for Mon MLK Day.
SPX options OI for Wed is small/moderate with a slightly positive bias toward a
BE at 6950.
SPX options OI for Fri is moderate/strong and a similar bias toward BE of 6950
due to puts at 7000.
SPX options OI for Fri EOM is strong with a slightly negative bias toward BE at
6930, but most noticeable is the lack of put support at 7000. Compare this
to EOM Dec (lower chart) and the lack of high put support and calls at 7000
seems to indicate an expected volatility event, probably the SCOTUS ruling on
tariffs.
SPX options OI for Fri Dec EOM is strong .
SPX options OI for Fri Feb 20 AM monthly is strong with a very strong positive
bias toward a BE at 6995, indicating any late Jan/early Feb weakness should be
quickly reversed.
IV. Technical / Other
This week I wanted to take a brief look at the Combined Put-Call Revised
indicator (Equity + ETF + SPX), .
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 at a strong Sell near -2.0 SD, YM (DJIA) remains below neutral at - .15 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. In the latest saga of the US trade wars, I just heard
the Trump is starting 15% across the board tariffs on 8 major EU countries over
Greenland, to increase to 25% in June. Now Greenlanders are wearing MAGA
hats (Make America Go Away). At some point things will boil over, but in
the mean time its like the watched pot that refuses to boil.
Weekly Trade Alert. By the end of Jan a ST decline is likely to
start (possibly SCOTUS tariff decision) that results in a 3-5% SPX pullback
(6750-6850). Updates @mrktsignals.
Last weeks SPX direction call proved to be correct (Up) but again
underestimated the markets strength. This time, the unexpected move by the
US military against Venezuela (capturing Maduro) was seen as a positive for US
oil supplies due to their large reserves, and led to sharp rallies in DJIA oil
stocks. However, the Venezuela oil is extra heavy quality that requires
expensive refining and may not prove as great a windfall as the reaction
reflects. Techs (NDX) continue to lag but late week strength indicates the
possibility of a gap fill just below 26k or about 1% higher. There is also
a Bradley turn date on January 19 that may be significant if the SPX falters
around the 7K level.
Bearish sentiment is little changed, but the ST Composite has turned negative
while short of a weak Sell. DM/SM and ST/INT Composite remain below a weak
Sell, while Hedge Spread and VIX Call indicator remain near neutral, showing
little indication of a big pickup in volatility.
SPX options OI indicates next week may be mostly rangebound (SPX 6950-7000)
with some weakness possible late Fri.
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 remains near a weak Sell.
Update Alt EMA. Bearish sentiment moved higher, now 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 saw a sharp drop early in the week but closed near
neutral.
Update EMA. Bearish sentiment remains slightly below neutral.
The ST VIX calls and SPXADP indicator bearish sentiment remains just below
neutral.
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 remains mid-way between a weak and strong Sell.
Update FOMO calls. Bearish sentiment remains in-between a weak and strong
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 remains at 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 moved up from a strong Sell, but remains below a
weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment moved further below neutral, but remains
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 between a
weak and strong Sell.
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 continues to rise toward neutral as 3X ETF and options
bearish sentiment increases. Could be ST bullish.
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 rose, but remains near 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 Jan 16. 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 6966, options OI for Mon is moderate and shows a slight
negative bias below the 6950 pivot otherwise call resistance is 6990 and 7000.
Wed has smaller SPX OI with little put support until 6770 and call resistance at
7000.
For Fri AM strong SPX OI shows a high BE at 6950 and a low $P/C, likely due to
high call premiums that may cap upside to bleed premiums.
For Fri PM moderate SPX OI shows a drop in BE to 6900 due to lack of puts over
6900 that could mean a late day pullback.
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 + .1 SD, NQ
(NDX) remains at a strong Sell near -2.0 SD, YM (DJIA) moved below neutral at - .25 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Trump seems to be trying to make some announcement
every week for new programs that have the potential for long term gains to keep
the stock market going. However, the outcomes remain uncertain such as the
goal of making the US the crypto capital of the world, and the latest venture
into Venezuela reminds me of the expectaions of an oil bonanza expected from the
invasion of Iraq after 2011 which ended up as a dud.
Weekly Trade Alert. Most of the gains expected thru options exp
were likely seen last week. Strength in NDX to 26K may keep SPX over 6950,
but a late fade is possible late Fri Updates @mrktsignals.
The calls the last two weeks were correct for direction (up for Xmas, down
for New Years) based on the SPX options put/call bias but extended beyond
expectations. Last week a drop to SPX 6850-75 was expected from the 6930
level and the intra day low Fri was 6824 with a 6858 close with options OI most
effective for the close. Next week is expected to be up with hte Dec jobs
report Fri. Recent initial claims for unemployment and recent ADP reports
have rebounded from earlier weakness, and a positive report may cause short
covering toward SPX 6900.
After several months of almost no change in sentiment measures, bearish
sentiment is now dropping sharply. SPX 2X ETF and SPX options sentiment
have dropped to levels seen at the Jan 2025 lows just before a final rally into
the late Feb high. The largest change in sentiment was in the futures
(Tech/Other) where DJIA sentiment (YM) had been near a weak Buy and SPX (ES) was
positive, but both dropped to neutral or lower
Trader Joe
outlined a couple of ES/SPX options Thur that indicated a possible top this
month, but SPX ETFs and options indicate late Feb to mid-Mar as more likely.
The INT/LT Composite remains at a weak Sell, ST Composite dropped below
neutral, ST/INT Composite remains below a weak Sell, and FOMO call indicator
continues to drop toward a strong Sell.
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 remains near a weak Sell.
Update Alt EMA. Bearish sentiment continues to hold near a weak Sell with LT
sentiment declining.
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 continues to move lower, now below neutral.
Update EMA. Bearish sentiment improved slightly to neutral late in the week.
The ST VIX calls and SPXADP indicator bearish sentiment rebounded toward
neutral.
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 rebounded from a strong Sell VST (grn), but
remains below a weak Sell.
Update FOMO-calls. Bearish sentiment continued to fall from strong call buying,
well beyond a weak Sell from just above.
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 remains at a strong Buy as my comments on
correlation with China's SSEC seemed to trigger a strong reaction Mon.
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 remains near a strong Sell with LT sentiment
declining. DM/SM sentiment continues to track the
AAII Survey where weekly Bearish
sentiment fell 20% thru Wed.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment rose from above a weak Sell toward
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 continued to fall
below a weak Sell with SPX options sentiment (grn,purple) similar to Jan 2025
before a final rally.
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 is little changed at just above 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 is slightly lower at below 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 Jan 9. 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 6858, options OI for Mon is moderate with a bias upward
toward BE at 6890.
Wed has small OI where SPX again has a bias toward 6890.
For Fri jobs report moderate options OI shows put support between 6800 and 6850
with call resistance beginning at 6900. Buas to BE at 6895.
For Fri Jan 16 AM strong SPX options OI has a bias to BE at 6925 bolstered by
the straddle at 7000. Here's what Google's AI says about the
straddle..
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 dropped
sharply to neutral + .1 SD, NQ
(NDX) improved, but remains at a strong Sell near -2.0 SD, YM (DJIA) also
dropped sharply to neutral - .1 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Last weeks bounce at the Fri close may continue into
Jan option exp on the 16th, but the rally may be muted and fall short of the SPX
7000+ many are expecting, Next weeks target is 6890+ and 6925+ for exp
week. Largest put support is for Fri job report, so a positive surprise is
likely.
Weekly Trade Alert. Expecting continuing but mild upside from Fri
lows to SPX6890+. Updates @mrktsignals.
