DIA, VIX Diverge As SMH Surges: May 27 Stock Market Preview
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Tonight’s YouTube video takes a look at SPX, QQQ, APP, IWM, MU, and MRVL, 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 Dow’s Move Friday: One-Hit Wonder?
Today saw most indices holding a gap up and improving somewhat from that starting point, with the exception of DIA, which made a lower high compared to Friday and closed lower after completely filling the gap back to Thursday. Was Friday’s top “the” top for DIA this round, or will we see more upside? I’m not too concerned until we see sub-500 prices for DIA, and 510 is still a possible upside target, barely missed Friday. The negative divergence and the potential implication across the board does warrant watching, especially if DIA continues to drop.
Semiconductors: MU To Infinity (And Beyond)
I just realized my kids have had Toy Story on recently..Sorry about the reference. MU reached 977.77 after hours, literally 10x the price seen in May 2025. If you don’t believe this is a bubble, maybe you’re also buying materials stocks on margin, because a true believer knows we have nowhere near the ability to mine enough copper and rare earths for what is being priced in, so those companies will require massive (and rapid) investment. But I digress- let’s deal with the euphoria of the moment.
SMH reached 600+ today, which was visible as a potential GEX target for several weeks. The GEX picture actually hasn’t shifted dramatically for SMH since then: We don’t see new higher targets with meaningful GEX like we saw at 600 when we were lower. Large GEX clusters now rest beneath the current area, with 500 really sticking out. Both 530 and 550 saw meaningful volume today, both of which represent good areas to watch if and when we see SMH pull back.
The extension above the weekly Keltner channel is one for the record books at almost 40 points above the line. The only time we saw an extension that was even close (going back to at least 2002) was in March of 2024, when price reached a 20-point extension intraweek before closing modestly above the line. We then saw 2 months of consolidation and lower prices for SMH, with the ultimate bottom not occurring until March of this year.
Does the current extreme nature of the move guarantee an even longer consolidation once a pullback starts? Of course not, but we do already see weakness in some other semis, like NVDA and a possible reversal in MRVL, so we need to monitor other big players in the sector and corresponding shifts in their GEX pictures.
QQQ: Resting Above The Upper Keltner
QQQ almost tagged the upper weekly Keltner 2 weeks ago, which marked the beginning of a modest pullback. We’re back at the top again- this time over the line at 730.22. QQQ tagging the upper weekly Keltner is fairly rare, just like we saw with SMH. The last time we saw a similar situation with QQQ was early 2024, and further back we see the same in early 2023, with each of a small handful of instances resulting in anywhere from 1-12 weeks of sideways/down movement.
A wick above the upper channel is within the realm of seeming to be a reasonable expectation given the circumstances, but I wouldn’t count on such a move lasting long. On the positive side, we do see GEX up to 750 in meaningful relative size, so even a pullback may be met with buying until higher prices are ultimately reached.
700-705 seems to be a zone worth watching for an initial look at how buyers react to a modest pullback. Below 700, we’re likely looking at 670-680 as a target, in our view.
SPX: 7600 Still Awaiting A Visit
SPX is above the daily HMA, and the ascending upper Keltner channel is almost right at 7600, aligning with the GEX at 7600 that we noted as a potential target. A final move for this round to 7600 could happen as soon as tomorrow, with or without QQQ tagging along.
The GEX picture seems to suggest that 7600 carries good potential as a reversal area, and 7400 now appears to be a support and/or pivot zone, given the large amount of positive and negative GEX at that level. Below 7400, we can entertain a visit to 7000, which continues to see relatively large volume and maintains a large amount of GEX.
An Important Test For The VIX This Week?
The weekly HMA is now at 17.04, greatly increasing the odds that the VIX finds itself crossing over or testing that line at some point this week. Given that GEX hasn’t shifted lower at all, and volume is strictly focused at higher strikes beyond 16, the risk/reward for volatility currently appears to be tilted toward a higher VIX.
We just completed yet another day of the VIX showing negative end-of-day correlation to VVIX, marking multiple days over the last week of such a divergence. When we see clusters of negatively correlated days in a short time frame, we’re statistically more likely to see a VIX spike in coming days, though we can’t narrow that window down with any degree of precision. We will sound the alarm if we see the VIX closing above 17 tomorrow, with 20 as a potential first target to monitor.
Wednesday may end up being an interesting trading day and we hope you’ll join us for the discussion in Discord!
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