SMH Pummeled, VIX Yawns: May 20 Stock Market Preview
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Tonight’s YouTube video takes a look at a comparison of SPX and SPY’s GEX pictures, which are different, as well as QQQ, the VIX, NVDA, and SMH, so check it out if you have a few minutes! The current and prior videos can be viewed by clicking Community at the top of our homepage to find our YouTube channel link.
The first post-OpEx trading day of May was an interesting one, with SMH seeing follow-through to the downside with almost a 10-point drop from Friday’s close and a roughly 28-point drop from the intraday high to low. SPX was down modestly and QQQ was down a bit less modestly due to the influence of SMH. The VIX didn’t care about any of it, bucking its trend of seeing some elevation on Monday by deciding to sleep through the entire day.
Wednesday will be interesting, both before the cash session opens and afterward, with monthly VIX options expiring premarket and NVDA reporting after the market closes.
The VIX has a setup for a spike, holding above key HMA and 9 SMA levels, and we saw over 420,000 contracts traded at the 65 strike, a very unusual trade when compared to VIX trades over the last several years.
A VIX spike to anywhere from 20-25 would be the minimum upside target, though it’s unclear whether or not such a spike might occur this week or later.
We don’t see much GEX below 17, so the odds favor sideways consolidation or upward movement for the VIX.
Let’s look at SMH again as we approach NVDA tomorrow: Conflicting signals exist as we see a bullish overall trend, with Keltners aiming higher, yet GEX and multiple days of outsized option volume are very concentrated at the 500 strike.
We also see price approaching an interesting support area near 520, with today’s low just below 528.
From my view, I think there’s a real risk or possibility that SMH runs up to the upper Dealer Cluster zone at 600. But there’s a caveat- the timing may involve a deeper push lower (toward 500) before the move higher.
How does this fit in with NVDA tomorrow? I’m not sure, but we see most of the volume for SMH between 400 and 550. I think the risk to keep in mind is a move to 500, then to 600, but reacting to whichever is touched first (500 or 600) might be the more prudent move, if one doesn’t already have a position.
A variety of overhead resistance levels ranging from 560-580 exist, making immediate upside appear to be a more daunting task, in my personal opinion.
IWM selling has accelerated relative to other indices, possibly leading the way for a short, sharp drop that represents a good buying opportunity. IWM GEX and volume are both tilted lower, at least toward the 270 strike.
Today’s action saw a low at 270.63, awfully close to what we see in terms of GEX. It’s possible that we drop toward 260, but overall, signs point toward an imminent IWM low and a higher odds play to the upside, even if we only see a lower high at 280.
While other indices show negative GEX, SPX still (barely) shows positive GEX, a divergence that might be worth noting.
The 9 SMA at SPX 7406 may be revisted, though current momentum and the GEX chart suggest 7245 may be worth a look as a more important downside reversal target.
Volume and GEX at 7000 continues to be elevated, potentially representing an important resistance-turned-support area if we are to see a completion of the downside move prior to achieving new highs.
Lastly, QQQ is respecting the weekly Keltner channel I’ve often mentioned over the last 2-3 weeks as the last resistance level on my charts.
The upper channel has gone as far as to turn sideways/slightly lower, a potential sign that the recent turn lower has meaning beyond a few hours or a day or two.
the rising weekly HMA is currently at 681.7, so the bullish scenario may be possible as long as any drop holds that general area.
Otherwise, big GEX at 650 may be calling QQQ instead, only then to resume upside. Bottom line is that we have barely seen a decline across the board, and no VIX spike, so risk exists in both directions until a more definitive pathway is chosen.
We will wait for the cash session tomorrow to see what the 0 DTE picture is telling us and we’ll be sure to share some of our observations for free in Discord!
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