Cracks Emerge On OpEx: May 18 Stock Market Preview
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Friday was the first day since May 4 that SPX closed below the daily HMA, and positive GEX dropped considerably as well. Can we write off Friday’s weakness as OpEx “noise,” or are we about to see a pullback for the first time since March? Let’s start with the VIX, then circle back to SPX later:
The VIX bottomed May 6, and last week saw the VIX holding above the 9 SMA and the HMA, with both moving averages now trending higher.
Negative GEX remains at 18, though we have seen GEX increase at 19 and 20 as well, which (combined with technicals) potentially indicates improving odds of a spike to at least 20.
Monthly VIX options expire Wednesday morning premarket, so we’ll keep an eye on the GEX picture as we approach Wednesday. It’s likely too early to write off attempts to retest market highs, so any VIX spike early this week may end up fading as late dip buyers provide temporary support for major indices.
QQQ reached the upper weekly Keltner channel, respecting the line quite nicely as price faded off of that upper boundary tag.
We do see positive GEX up to 750 that may ultimately be a target, but when? Current odds favor a pullback to a lower level before QQQ continues a move that far away from the current price.
If QQQ sees any continuation lower, I think 700 is the obvious first stop to watch, and then I’m watching 670, which will soon be met by the rising weekly HMA.
The current upper Dealer Cluster zone starts at 726, which is just above the daily upper Keltner channel currently. Given that we see GEX at 726 and the upper Keltner channels on both the daily and weekly timeframes are nearby, another QQQ rally to a slightly higher high is not out of the question.
SMH actually closed below the 9 SMA, so SMH is at serious risk of a fast, sharp move lower to the 500-525 area.
SMH is important because of the value of semiconductors in the QQQ rally, so if SMH looks weak, the implication might be that QQQ either sees rotation to other names (software or other major weighted stocks), otherwise SMH might be leading the way lower.
Over 119,000 contracts traded at the 500 strike, a noteworthy level of options activity.
SMH may ultimately be heading to the large positive GEX cluster at 600, but does tag happen now, or after a deeper pullback?
Excluding 0 DTE GEX and volume (as we’ve done on all charts shared, FYI), we see major activity at 7000.
If SPX loses 7392, we may see a fast drop to 7200, near the middle Keltner channel.
SPX net GEX dropped off substantially, though still in positive territory on a daily close.
The last time we saw a sharp drop in GEX was early May, so we really want to see a few days of negative movement to assign more meaning to what might just be “noise” again.
IWM seems to be leading the way down, making lower highs since May 7.
IWM is getting a bit stretched below the daily HMA, with 270-275 representing a potential dip buy area for a snapback rally toward 285. What happens at the 283-285 resistance area will be potentially important regarding IWM’s intention of either rallying toward 300 or dropping back down toward 260.
We will wait for the cash session tomorrow to see what appears to be likely and we’ll be sure to share some of our observations for free in Discord!
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