Stock Markets Sentiment (05.03.2020)

Often prior to trades I execute I look at sentiment in the markets. Specifically I look at option interests, put to call ratios, indexes' MACD, RSI, and VIX. I am currently focused on SPY and IWM and when I trade shares I use 3x inverses in SPXL for long SPY and SPXS for short SPY. The trades I do are more or less swings and scalps. After watching March and April unfold the way it has I have limited my position holding overnight since I tend to not have a good feeling on after hour trading.
If curious as to where market sentiment is currently here are some notes I have summarized.

Open Interest of May SPY options


Currently put to call is at a heavy 2.30 in favor of bears and contrarian view is bullish on stocks. This is because the monthly expiring options are overwhelming leaning on markets to fall further when that is the case it usually does not happen. Think if majority was right then would majority not be the rich?

Options in all stocks except Indexes ($CPCE)

The graph at the beginning of this post is leaning toward an uptrend for puts being bought for equities. However at 0.82 it is still below that of March where stocks faced a draw down from all time highs. The challenge here is to determine if the puts to call ratio will continue to rise as that would mean traders are hedging or betting on lower stock prices. Another item noticable in the CPCE number is that during the beginning of 202 up to 2020 February the number had not exceeded 0.8 therefore current market conditions should be thought of as cautious at the very least.

Fear Gauge

 There is still fear in the markets rather than in February prior to the stock cliff dive were gauge was reading bullish around +80. This means there are still majority of traders expecting worse or not so good results in current market conditions.

SPY Daily Price


To keep it simple I read spy graph with RSI, MACD and Bollinger Bands. It is clear we have an inverted hammer on Friday's close so look for continuation of a drop tomorrow is the initial assessment. With both MACD and RSI rolling down the momentum is leaning toward bears. Yet prices remain in the bands and can be considered neutral. It remains to be seen upcoming week as bulls or bears will take lead, but since top tech companies had released earnings as of last week the tech companies in general fear decent. However last Friday AMZN took a hit that basically made its price near what it reach at the recent March lows. This does not bold well for tech stocks since weakness has shown its ugly face. If in fact tech stocks have reached a top and since tech has been leading this recent rally it would be another sign stocks have more room to fall.

My Predictions

Seeing AMZN get dragged down and the coronavirus yet to really subside the head winds seems too much to make stocks rise much more than their recent 294 touch in the middle of last week. Although markets look ahead rather than current conditions it may likely be better six months down the road than now. The reality for me is settling in as US alone has over 30million unemployed which is close to 20%. This is quite literally what history would define as a depression. The challenge for the US to start back up and get people back to work is another head wind. It is personally very difficult to be bullish in the markets, so as of now when I see any decent uptick in price I will be anticipating to short. If I am wrong I will need to exit my trades and re-evalute the market sentiment.