New Highs For SPX, Lower High For DJIA? April 16 Stock Market Preview
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SPX and QQQ made new all-time highs today, but IWM and the Dow didn’t follow (more on that later). Interesting records are being set:
First time since 1928 that we’ve seen a 5-10% drop followed by new all-time highs within 11 days.
Today’s all-times highs were achieved with only 12 stocks making a 52-week high. Since January 4 1999, this sort of “bad breadth” at highs has only happened 5 times prior to today.
Excluding 0 DTE GEX and volume on 0 DTE contracts, we see GEX is still larger at higher strikes, yet volume was greater at 7000 and below. 6700, 6750, and 6800 in particular saw relatively high volume, and we can say the same about 7200.
SPX is now in the upper Dealer Cluster zone and 2 points above the upper Keltner channel, so while we’ve cautioned the likelihood of a pullback imminently in recent days, we’re now at what I consider the maximum stretch. Of course we can see an overshoot, but without any of my indicators supporting a continued move higher at this exact moment, my guess is that any further push will be short-lived.
The GEX we see at 7100 is mostly concentrated at the mid-May expiries and beyond. A pullback will need to be evaluated as it unfolds in order to determine whether or not we’re looking at a higher low or something worse, but a drop to a higher low may fit well with the idea of reaching those higher levels into May.
Continuing with the signals often associated with being near a pivot, we see SPX displaying net GEX at today’s close of over 3.3B, well in excess of the 2.5B+ required for our GEX Intensity Gauge to flash an extreme reading when compared to readings over the past 52 weeks.
GEX this high often precedes pullbacks, even if the positive GEX itself may signal better odds of continuation afterward. The contrarian reading stems from the notion that participants are likely too heavy on one side of the boat, to use an analogy.
QQQ also reached the upper Keltner Channel, right at the upper Dealer Cluster zone. SPX and QQQ both show GEX mostly at higher strikes at this point, but without rehashing all of the factors outlined previously, a consideration of the full picture brings a pullback into focus as an event with improving odds as we climb further into rare territory.
Looking at QQQ’s 3D model, we see a lot of large positive GEX at 635-640 for April 17 (essentially right where we are, implying limited upside potential), but the largest single net GEX cluster expiring tomorrow is at 626. Can we get a 2% pullback for QQQ tomorrow, then another bounce to retest highs Friday? Sure, why not. I would rather enjoy the multi-directional volatility (send all complaints to the editor’s inbox).
DIA, representing the Dow Jones, is considerably lower than its previous all-time high, an obvious negative divergence from SPX and QQQ. In this age of ignoring history and traditional market indicators, does such a divergence matter? Maybe the Dow is destined to be hated until it flips the “IA” in DJIA to “AI.” Or maybe it does matter, and SPX will end up facing the effects of gravity soon.
I don’t have the answer, but I know DIA does not look overly positive, and we see elevated volume mostly at lower strikes Wednesday.
If DIA is to play catchup with SPX, I’m open to the possibility of outperformance in the next couple of days, but it likely needs to happen fast, if it’s going to. 490-500 is a possible range for a DIA short-term top, in my view.
IWM has continued climbing, but much more modestly compared to 2 days ago. IWM is pennies away from the 270 target that GEX has pointed to for the last week or so, also aligning with the upper Keltner.
Volume is especially elevated at lower strikes, with 250 continuing to be a volume and GEX favorite in recent days.
I’ll continue watching IWM intraday for a possible warning that may apply to other indices. Watch for a drop in IWM that seems to be out of character with the other indices, if they all start out looking positive Thursday. Such a warning may not occur, but seeing an early reversal might improve the odds of getting out of the way of a negative surprise with SPX or QQQ.
The VIX is likely reaching a short-term low, with the last two gap downs seeing the VIX increase during the cash session. The HMA will likely cross under the VIX tomorrow, triggering a long volatility signal for me.
A bullish scenario would potentially see a VIX spike to 20-25 that gets rejected.
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