SPX 7600 In The Crosshairs: May 29 Stock Market Preview
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SPX: Checking Off The 7600 Box?
We viewed the setup to reach 7600 as being intact as long as SPX held above 6500, which it did on Thursday. SPX is now a mere 36 points away, so 7600 does seem like a foregone conclusion. While a move beyond 7600 can’t be ruled out on an intraday basis- or even longer- the odds of sustaining a move above 7600 don’t seem great. We have the upper daily Keltner channel aligning closely at 7615, and most of the GEX and option activity (excluding 0 DTE GEX) has been focused on lower strikes.
That said, we’ll continue to add context in terms of the growing GEX at higher strikes, so eventually we do believe those higher strikes will come into play, even beyond 8000.
SPX GEX Is Nearing An Extreme
Our GEX Intensity Gauge measures GEX against GEX readings from the past year, with 2.5B marking what we consider to be an “extreme” for SPX. Today’s reading of 2.15B at the close is very close to that extreme. The last two instances where we saw SPX GEX over 2B (May 6 and May 14) both marked tops, with May 7 being a single red candle before continuation higher, but May 15-19 saw 3 straight trading days that were red. All of that to say we’re likely at the initial edge of where GEX readings can actually be contrarian in the short run.
Small Caps Nearing a Decisive Moment
IWM looked like it was about to make a trip back to the yellow HMA at 284.90 when it reversed, closing almost 2 points higher today. The potential remains to hit the upper Keltner channel at the 300 GEX cluster, but the HMA and the lower dealer cluster still looms below. IWM needs to hold 290 in order to continue toward 300 in my view, which doesn’t leave much margin for error for IWM. Whichever way it goes, Friday would be a good day to reach the next level of support/resistance, so stay tuned to the 0 DTE GEX picture once the cash session opens tomorrow. We’ll share some of this data in Discord at that time.
VIX: Stretching For “Max Downside,” GEX Not Buying It
Lately, the VIX hasn’t been able to make any headway to the upside, yet we haven’t seen much to the downside, either. That is, until yesterday and today, with the VIX moving from 17 to 15.66. GEX is still largely concentrated at 16 and higher, with virtually no GEX below 15. The most active strikes in the option market continue to be higher strikes as well.
Various timeframes such as the 2-hour and 4-hour timeframes show the VIX to be nearing extreme oversold conditions that have marked previous reversals, and with the weekly HMA at 16.91, it won’t take much for the VIX to cross over that key momentum line that I watch, potentially triggering a quick spike higher, even if it’s only to the 20 strike.
Today saw some rotation from the semiconductors into other tech names, including some of the Magnificent Seven like MSFT, so we’ll be watching for any final upside gasps by the market to potentially be driven by other sectors/stocks. Rotation may delay an across the board drop of any meaningful magnitude, though the VIX may be a good tell as far as when the market might be ready. We’ll certainly be posting what we see in Discord, in our General Chat on Friday.
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