SPX 7600: Now, Next Month, Or Never? May 28 Stock Market Preview
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Indices were flat to down today following the big move on Tuesday, and SPX still leaves us wondering what comes next. “Never” is probably too dramatic of a word in terms of asking whether or not SPX will reach 7600, but it got you to read this, right? As long as SPX holds above 7500, the risk of a quick spike to 7600 is within the realm of possibilities. Later on, we’ll look at why there’s at least some doubt as to whether it’s more likely now or later.
QQQ: Hard-Pressed To Continue Uninterrupted
QQQ remains barely 1-point above the upper weekly Keltner channel, failing an attempt to press higher intraday. A sustained further move higher without a pullback for QQQ would be surprising, given our discussions in recent days centering around the rarity of even reaching this upper Keltner channel, let alone going beyond it.
Excluding 0 DTE GEX and associated 0 DTE volume, we see heavy volume at lower strikes today, and we did see a reduction in positive GEX, though it’s still positive overall. Bulls have the momentum to potentially tag the 740-750 area, even if it’s a brief trip, and short-term downside risk is present to 722. A loss of 722 will likely bring a more bearish move down to 705-700, in our view.
SPX: Caution In The Near-Term
As noted earlier, SPX has a setup to reach 7600 as long as 7500 holds as support. I can even lower my boundary to 7486 to include the HMA, so we can use the zone of 7486-7500 as a potential pivot/support area. A loss of 7486 on a daily close may see 7400 quickly, though enough GEX sits at 7400 to treat that area as a possible dip buy, especially in context of the GEX we see at higher strikes. If we see a quick drop to 7400, the odds favor a move back to tag 7600, as long as 7400 holds.
We see positive GEX all the way up to 8000, but I think it’s too soon to be targeting that area without a pullback first (I’ve said that before, so beware). We also still see a large amount of GEX at 7000, and recurring volume every day, so a retest of 7000 may eventually come at some point this year. We’ll remain focused one level at a time.
The 3D model shows a large negative GEX cluster expiring tomorrow at 7475. A move down to that level is interesting in light of the 7486 level I mentioned earlier. We also see large positive GEX clusters at 7500 expiring May 29, and clusters at 7530 and 7555 that expire tomorrow. One of many scenarios for tomorrow could see a gap down or move down to 7475, which is not even 1% from today’s close, then a move back up to tag the 7530-7555 zone. Let’s see how it plays out!
VIX: Oversold Condition A Cause For Concern?
The 2-hour chart for the VIX shows the %B (20,2) indicator buried below 0.0 again, which is one of my favorite indicators for contrarian reversals. I’ve underlined prior instances going back a few weeks so you can see what typically happens. With the exception of the late April reading, which saw 5 bars prior to a relatively big spike, most readings at or below zero see a spike within a couple of bars at most.
Given that the lower Keltner channel is below 16, we could definitely see a quick move further down that reverses, but the conditions are present to justify a rebound in volatility immediately. Couple this with the lack of meaningful GEX below 16 and multiple recent days of negative correlation between VIX and VVIX and we have a recipe for a potential spike to the 18-20 area at a minimum.
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