Sell In May…I Mean, June?
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Today’s YouTube video was recorded after Wednesday’s close, taking a look at where markets finished the FOMC session as we head into the final day of trading this week on Friday. You can view the short video by clicking here.
The Hull Moving Average is in a steeper decline for IWM, and the Hull has started turning more negative for SPX and QQQ as we spend more time below the line with selling pressure mounting. Futures are down as I type this update. However, we need to look at a few signs that may point to some upside before we see more downside. Any look at short term possibilities is inherently speculative, so keep that in mind. Looking at the chart below, we see SPX closed near the lows of the day, and we see GEX remaining large at 6000 and now at 6050, even more than at 6100. We are in the lower Dealer Cluster zone thanks to GEX shifting Wednesday, but the zone extends down to 5900, so we have some room within the zone.
Unsurprisingly, SPX GEX rebounded after the large 0 DTE negative GEX rolled off Tuesday, but let’s not place too much faith in that particular data point, since the current barely positive reading is still technically neutral. We’ll consider some other points to help us come up with a more solid conclusion regarding what seems most likely for Friday and beyond.
The 3D graph raises some interesting data points regarding tomorrow. First of all, we see a large negative GEX cluster, but note that the strike price is at 6000, higher than the current price for SPX. The largest positive GEX cluster expiring tomorrow is at 6050, matching with the noticeable GEX cluster we saw on the GEX Levels chart earlier in the newsletter. Sorry bears, we may open up lower tomorrow (likely, in fact), but the largest negative cluster and the largest positive cluster both sitting at higher strikes doesn’t exactly scream “we close lower” for tomorrow. We’ll consider new potential developments once the cash session opens, of course.
QQQ’s Hull is also starting to decline, currently at 533.91. 520 is the upper edge of the lower Dealer Cluster zone, not even 2% away. 540 remains as a possible upside target based on GEX, and QQQ still shows marginally positive net GEX overall, but we first need to see QQQ capture the Hull at 533.91 and turn it into support.
QQQ’s largest GEX cluster expiring tomorrow is at 535, a higher target than Wednesday’s close by over 1%. Similar to SPX, QQQ’s largest negative GEX cluster is also higher in price at 530, an unusual setup that I consider to be a positive sign given the otherwise negative price action over the last few days.
IWM took the most negative turn recently, which might be leading the way for the other indices to follow. The Hull is pointing fairly sharply lower and GEX is also the most negative. IWM is also already at the middle Keltner channel, with 205 and 200 looming below. IWM shows us a similar theme for Friday- the possibility of higher prices. To cut to the chase, I am withholding ultimate judgment for tomorrow until we see what the cash session advertises, but I think there’s a good chance any gap down tomorrow gets bought, we see a nice rebound, maybe seeing the indices finally testing the Hull above, and then we head toward lower targets next week. For IWM, 205 tomorrow would be nice, 200 after a rebound. Let’s see how it plays out and prepare to adjust accordingly.
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