SPX, Inflation Data, And OpEx: May 12 Stock Market Preview
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Tonight’s YouTube video covers SPX, the VIX, GLW, RKLB, and TSLA, plus you can view our library of previous videos by clicking Community at the top of our homepage to find our YouTube channel link!
Indices largely consolidated today, technically printing new highs, though not a lot of ground was gained.
The trend remains higher, though we’ve drawn attention to the near-term headwinds that we believe indices may encounter from a number of angles, including the historical relationship to the weekly Keltner channels after such a steep move.
QQQ’s GEX data reveals potential upside targets as high as 720-725, which would represent a little less than 2% upside at most from here, also going beyond the upper weekly Keltner channel.
The indicator serves as a guideline for me, so my personal expectations don’t hinge on an exact tag and rejection of the line, though that sometimes does occur. An overshoot is entirely possible, though I wouldn’t expect such a move to last.
Volume is still mostly at lower strikes, when we exclude 0 DTE volume from the picture (visible in light blue to the far right).
Regardless of the micro path forward, I still expect resolution lower, perhaps later this week or beginning next week. QQQ action around this 610-620 area will be key to see how any potential consolidation unfolds, backed by the GEX picture, showing QQQ to be within the upper Dealer Cluster zone.
Excluding 0 DTE GEX and volume, as we’ve done in the chart below, you can see that 7500 is now the largest net GEX cluster, with the upper Dealer Cluster zone extending from 7500 to 7600.
I’m not convinced that both SPX and QQQ will reach the upper channel, though it’s certainly possible.
Given the importance of the semiconductors in this entire rally, we do need to be open-minded to the idea of a rotation from semiconductors toward the sectors that might share some overlap with QQQ and SPX, allowing QQQ to churn sideways while SPX reaches its upper target, in theory.
Volume was heavy today at 7600, though cumulative option volume at 7000, 7100, and 7200 was far greater. Even with volume being noteworthy at lower strikes, GEX is still mostly at higher strikes, so any pullback will need to be evaluated in terms of the accompanying shifts in GEX, in our view.
7450 is the largest positive GEX cluster on both 5/13 and 5/15, so GEX indicates good odds of at least some upside this week that would constitute new highs.
We mentioned IWM’s weekly Keltner channel matching closely with the 300 strike, we also have the daily Keltners (shown below) rising toward that weekly target.
IWM looks bullish as far as the chart goes, the rally has been constructive while avoiding the eye-popping blow-off appearance of the Nasdaq.
That said, IWM could also simply be the underperforming index in this particular move higher, so we need to watch the 284 HMA closely, and 281 if 284 is lost. These moving averages are also near important GEX levels, so losing those areas on a daily close could signal lower targets.
Daily volume (excluding 0 DTE volume, once again) continues to be focused on lower strikes as low as 260.
Another observation that may have some contrarian value: IWM has entered positive GEX territory again.
Each of the last several times we saw IWM with positive GEX-including the close on May 1 just below the positive line-IWM marked a short-term high within a couple of days of the GEX high. Does this mean IWM is near another top? Maybe we’ll know by later this week.
Lastly, let’s zoom out and look at the VIX weekly chart. The VIX made a recent low Thursday, and now the weekly HMA is about to cross over the VIX. I’m guessing this could happen within the next 2-3 days.
You can glance back at the last several times this happened following a sharp drop in the HMA and we saw a small VIX spike at the very minimum, sometimes much larger trend changes occurred. So we are nearing a time when multiple indicators are pointing to greater odds of a pullback.
With potential catalysts tomorrow and Wednesday (CPI and PPI), will buyers find an excuse to rush for the exits? I won’t hold my breath during OpEx week, but we are definitely on watch for a possible reversal any day. We’ll continue taking it one day at a time, and we have newly established hedges in place to help at least partly offset any pain felt on the long side.
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