Last week I pointed out that several indicators (in Tech/Other) including the
Rydex 3x ETF Bear/Bull ratio and the NYSE Adv/Dec volume were at levels that
could indicate SPX 6000 may be possible, but WS came out with similar projections
and we had what seemed to be major capitulation by the bears. My in-house
indicators continue to point to simiarities to the Feb-Apr 2022 declne and
rally, and the Tech/Other section looks at the NAAIM active manager exposure
index and the Rydex ratio which also show bearish capitulation. There is
also a Bradley turn date late May, so we may see several weeks of sideways
action (similar to Dec 2015) before a significant downturn.
The LT ES expanding wedge of
Trader Joes which predicted a drop to 4800 in early Apr also
shows a top near 5600 before a drop to the low 4000s by late 2025. This
would make sense where lower prices thru the Fall would likely cause the GOP to
panic, creating a major fiscal stimulus package to save the markets, and in
mid-2026 a new "more flexible" Fed chariman is appointed by Trump and we get
monetary stimulus. The result could be SPX making new ATHs by late 2026
before the mid-term elections, but 2027 is likely to see an inflation resurgence
aka covid's 2020-21.
In-house indicators show no major changes, but the VIX call
indicator remains between a weak and strong Sell and low ETF P/Cs have resulted
in the hedge spread dropping to a weak Sell as well as the SPX and NDX ETF and
ETF P/C indicators.
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 dropped slightly but remains above a
weak Sell.
Update Alt EMA. Bearish sentiment remains 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 remains near neutral.
Update EMA. Bearish sentiment remains slightly above neutral.
The ST VIX calls and SPXADP indicator bearish sentiment fell to a strong Sell
but improved to near a weak Sell by EOW.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (48%)
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 little changed.
Update FOMO Calls. Bearish sentiment rose above a weak Sell from near a
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 near a weak Buy as prices bounced back to
the 400s.
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 continues to fall, nearing a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment continues to move below a weak Sell, now
weaker than the Apr 2022 top.
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 mildly
positive.
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 has moved to 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 has moved 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 July 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 5660, options OI for Mon is moderate with a slight
negative bias to 5635.
Wed has small SPX OI where ITM calls show a negative bias to/below 5600.
For Fri AM strong SPX OI shows a positive bias but BE has dropped to 5675.
For Fri PM SPX has strong OI with a similar outlook to the AM OI.
For EOM May 30 strong SPX OI indicates a range of about 5600-5700.
IV. Technical / Other
This week I will take a look at a couple of external INT/LT indicators.
The first is the NAAIM active
manager exposure index which bottomed in mid-Apr at 35 similar to Mar 2022 and
jumped 20 pts each of the last two weeks and is now near the level of the Apr
2022 rally top at 81.
The second is the The second is the Rydex 3x ETF Bear/Bull ratio mentioned last week while still
at a Buy level, but dropped sharply during the week and has moved to a Sell.
Again the levels of sentiment are similar to the Mar-Apr 2022 period. And
don't forget the LT ES expanding
diagonal of Trader Joes shown early Apr which was looking for a low near
4800 and rally afterwards to around 5600 before a drop to the low 4000s late
2025.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
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) bearish
sentiment remains positive at 0.25 SD, NQ (NDX) bearish sentiment remains at a weak Sell at
-1.25 SD, YM (DJIA) is slightly positive at 0.15 SD.
Conclusions. Limited upside is likely for more than an intra-day
basis. Positive tariff deals are likely to cause temporary price spikes,
but it appears that it is now time to start "selling the rips". A major
deal with China (50% prop) may push prices to SPX 5850ish, but churning between
5550-5850 until late May is the optimistic outlook. Apr CPI comes out Tue
13th and may be helped by low oil prices.
Weekly Trade Alert. SPX options Oi indicates a potential range of
5600-5700, but positive news may cause a larger move higher. Updates @mrktsignals.
No specific price guidelines were given for last week, but a positive bias
was expected as the markets continue to be "news driven". The headline Q1
GDP release of -0.3% was first considered as a negative as a recession is
defined as two negative quarters of GDP, and the SPX fell to the low 5400s.
A look at the components, govt spending (G), consumer spending (C), investments
(I) and net exports (X), where GDP = G + C+ I + X, showed net exports as the
culprit (50% gold) at -5%, while G+C+I was +4.7%. This indicated a
stronger economy than expected and stocks quickly recovered. News of
progress of trade talks with China and tech EPS caused the rally to continue
Thur-Fri topping Fri at SPX 5700.
Several items indicate that the rally may continue higher than most expect.
First, the Rydex 3x ETF Bear/Bull ratio remains at a Buy level as of May 1.
Second, this weeks SPX options OI shows that the May 16 AM monthly OI has a BE
at 5700 and a huge straddle at 6000 (80K calls, 60k puts) may act as a magnet to
pull prices higher. Third, in this weeks Tech/Other section, I decided to
look at the history of the NYSE breadth indicator (Adv/Dec volume) for the last
15 years and noticed a strong correlation to the Aug 2015 "flash crash" recovery
which indicates a 90% price rebound is possible before new lows.
Overall sentiment is somewhat mixed with the ST Composite at neutral while
the VIX call and hedge spread indicators are at weak Sell levels so sudden
declines such as on Wed AM are expected to continue. Inflation may
continue to decline in the ST as indicated by the CITI inflation surprise index
(Tech/Other), at least until tariffs take effect and this may help stocks.
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 continued to decline and is now
about half way to the weak Sell.
Update Alt EMA. Bearish sentiment continued to decline and is now about half
way to the 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 fell somewhat, but remains near neutral.
Update EMA. Bearish sentiment is nearing neutral.
The ST VIX calls and SPXADP indicator bearish sentiment remains more bearish
and almost completely reversed from a strong buy to a strong Sell. More
volatility is expected.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (48%)
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 has moved to a weak Sell and is similar to Mar
2022.
Update FOMO Calls. Bearish sentiment remains unchanged 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 rose sharply as the HUI is nearing a 10%
correction on news of China's selling of gold.
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 in between neutral and a weak Sell.
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment continues to decline with longer EMAs
moving to 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 mildly
positive.
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 moved to more negative, but shy of 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 also nearing 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 May 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 5687, options OI for Mon is small but call resistance at
5690 may limit rallies.
Wed SPX OI is very small but there is strong call resistance at 5725.
For Fri SPX has moderate OI with significant ITM calls above 5600 and a ST
pullback may start before optn exp week and FOMC.
For Fri 16th monthly exp strong SPX OI with a BE at 5700 and a huge straddle at
6000 indicate 5700 or higher is likely.
IV. Technical / Other
Previously, I have mentioned the strong breath of the recent rally, but
questioned the interpretation of the "news driver" as a background.
Looking for previous patterns over the last 15 years shows 2015-16 as the
closest analog which also showed a very strong recovery rally. More in the
next chart.
From what I remember, the Aug 2015 "flash crash" was due to a sharp devaluation
of China's currency and as you can see there was also a very strong breadth
rebound. After a retest of the lows (in 2025 this could be SPX 5100
retest), the rebound continued to retrace about 90% of the decline (in 2025
about SPX 6000), however, there were still lower lows to come (in 2025 possibly
SPX 4700,4000?) before a sustained advance.
CITI Inflation Surprise Index for Mar shows a global decline inflation
that may also help stocks ST.
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) bearish
sentiment remains positive at 0.25 SD, NQ (NDX) bearish sentiment remains at a weak Sell at
-1.25 SD, YM (DJIA) is neutral at 0.0 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. So far stocks are reacting as if Trumps tarifs policy
is just a ploy to gain an advantage or offset the current disadvantages, but it
is unlikely that there will be no negative consequences as supply chains are
being disrupted and we saw what happened with covid. In the mean time I
view this as the eye of a hurricane, so enjoy it while you can. Earnings
outlooks are likely to be the driver for stocks in the ST such as MSFT and other
tech stocks last week with CPI due on the 13th. FOMC is Tue-Wed and QT may
be cancelled ($5B/mn) but any major outcome is not e3xpected.
Weekly Trade Alert. Next week could be dull with EOW weakness, but
optn exp week could see more fireworks. Updates @mrktsignals.
So last week turned out to be a reverse image of the previous week with a sharp
decline Mon from WS hysteria over Trumps "you are fired" threat to the Fed's
chair the previous week with another flip-flop and a strong rally the rest of
the week, blaming media misinterpretation. Trumps
policy positions, including tariffs, are beginning to look like a Spanish soap
opera and is not likely to generate a lot of confidence in foreign trade
partners to "make a deal". If we make it thru the 90 day tariff grace period and
everyone decides to wait to see what the "real deal" actually is, Trump is
likely to explode. On the markets, I seemed to be the only one expecting
the SPX to rally with a 5480-5520 target, but now that the "triangle" was broken
thru to the upside every one has turned bullish. Well not everyone,
Pretlzel Logic views SPX 5500-600
as important resistance and Springhell
Jack sees a H&S potential for the SPX with major risk from weakness in the
US dollar and bonds. The USDEUR is down 15% this year even with EU
economies in recession due to EUs stronger fiscal discipline and 100B euro
purchase of US bonds in Jan is now worth 85B euros, now thats a tariff.
Several of the important ST/INT indicators are warning of trouble ahead
including the VIX call indicator, the FOMO call indicator and hedge spread, but
a two to three week topping pattern is possible. Many have noted the
strong breath on many of the recent rallies which have also given a positive
bias to the ST Composite, but given the fact that most of the moves are "news
driven" (Trumps reversals), it seems like most of the buying may be short
covering as shorts are caught of guard.
SPX options are showing a slight positive bias thru Wed (EOM) toward 5540-50,
while Fri (Apr jobs) are not showing call resistance until 5600 and support at
5500, but I am not expecting any major surpriise.
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 retreated to below neutral and
remains weak compared to the 2022 bear market.
Update Alt EMA. Bearish sentiment moved closer to neutral or below.
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 back to neutral.
Update EMA. Bearish sentiment rose slightly but remains below a weak Buy.
The ST VIX calls and SPXADP indicator bearish sentiment saw a very sharp drop
moving from above neutral to below the weak Sell, very similar to the Mar 2022
bear market rally.
The ST/INT Composite indicator (outlook 1 to 3 months) is based on the Hedge Spread (48%)
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 further down from neutral, now near a
weak Sell.
FOMO calls. Bearish sentiment saw a very sharp drop with excessive call
buying and moved from a weak Buy to well below a weak Sell.
Bonds (TNX). Bearish sentiment remains at extremely low levels.
Springhell Jack thinks a bond panic
could send the TNX to 8-9% this year.
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 rise and may support prices.
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).
With the sister options Hedge Spread as a ST/INT indicator
(outlook 1-3 mns), bearish sentiment dropped sharply below neutral with the
last several weeks sentiment very similar to Feb-Mar 2022.
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 slightly, but
remains positive.
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 to negative with a decline led by ETF P/Cs.
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 below neutral from just below a weak Buy.
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 2. 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 5525, options OI for Mon is very small with put
support down at 5400 and call resistance at 5560.
Wed EOM has large SPX OI where put support is at 5500 and call resistance at
5600 and a slight positive bias to 5540.
For Fri strong SPX call resistance at 5600+ should limit rallies, while
disappointing jobs numbers (strong) could result in a move to 5500 or less.
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) bearish
sentiment moved to positive at 0.25 SD, NQ (NDX) bearish sentiment remains at a weak Sell at
-1.25 SD, YM (DJIA) is neutral at 0.0 SD.
Click dropdown list to select from the following options:
Tech / Other History
2025
2024
2023
2022
Other Indicators
Conclusions. Last weeks rally may continue for a few weeks, but upside is
probably limited to SPX 5600-700. I am constantly watching both the USD
and TNX for potential problems with the TNX sandwitched between 50,100&200 SMAs,
while USD has broken below 100 and shows no sign of recovering. The most
important chart may be the USDJPY
which looks like a dbl-top H&S with lower values negatively effecting the yen
carry trade which caused a sharp decline last summer. How long can the BOJ keep
rates at 0.5% when inflation is 3%?
Weekly Trade Alert. Some positive bias ST. Updates @mrktsignals.
