Markets showed amazing strength today, maintaining most of the gap up this morning as indices entered their upper Dealer Cluster zones. These zones can shift, and they each have some “wiggle room” within, but the markets decision to tackle these upside targets first now has us on watch for a constructive pullback in the near-term.

With the announcement of a trade deal with China today, futures have gapped up above the Hull moving average. We’ve been noting the uncertain picture painted by conflicting signals, though eventually we believed GEX signaled attempts toward 5800-6000 SPX. If the gap up holds, we may head straight for those higher targets, postponing another meaningful pullback until those targets are reached.

We saw indices test the Hull moving average from below today, an event we were hoping to see today or tomorrow. This test of support-turned-resistance saw rejection in most cases, though we need to look more deeply in tonight’s newsletter at some mixed signals that aren’t necessarily agreeing as to the next most likely step.

FOMC day was action-packed with frequent moves in both directions throughout the day, but not a lot of net movement occurred. We continue to see a mixed picture, so participants haven’t shown their hands in a way that gives us high conviction in one direction. What clues might tilt the odds either up or down?

Indices finally gapped down and closed below the Hull moving average for the first time since April 21, when the second leg of this rebound started April 22nd. Unlike April 21st, when we declined 4 days to reach the close below the Hull, we are at the beginning of the downside this time…Will the beginning also be the end, with another overtaking of the Hull tomorrow, or will we see another 5-10% pullback? Let’s see what GEX says.

The 9-day win streak couldn’t make it to 10, with indices rally from the open but still closing below Friday’s close. This also brought most indices right to the Hull moving average alongside a sharp reduction in positive GEX, or an increase in negative GEX for IWM. Are we teetering on the edge of the next drop, or resuming the climb tomorrow?

The VIX may be giving an early preview to a likely pullback coming soon, but SPX has noteworthy GEX at 6000 that indicates continuation higher is likely after the next pullback. What else can we tell by looking at the current GEX picture?

Indices are in the upper dealer cluster zones, and the VIX seems to be finding a floor. Will this consolidation resolve higher, or was today’s intraday fade a sign of a near-term trend change?

The noted bullish tilt for SPX’s GEX appears to have had an impact, with the top end of our anticipated pullback range being hit and quickly rocketing toward the 5600 level mention several weeks ago as an upside target. We’ve filled the gap from April 2nd, so what’s next?

SPX continues showing a relatively new large GEX cluster at 6000. We have some conflicting signals in the short term, so whether or not we see a pullback now versus later becomes an important question. Let’s take a look at the data.

Indices posted an indecision candle today, though the declining weekly 9-period SMA allowed a close above that important level…For now. We see a positive divergence with IWM, yet the VIX regained the 4-hour Hull moving average and almost captured the daily Hull as well. Is a larger pullback near?

The VIX rejected where bulls want to see it reject, and indices are at the doorstep of the weekly 9-period SMA with an improving GEX picture. Out of the woods, right? Well, it’s possible, but you’ll have to read more to see what we’re watching.

A brief update on the latest bug fixes and upcoming improvements…

DIA is the one last major index that may need to cross over the middle Keltner channel before the OCD market “allows” a pullback. Who’s with me? Let’s see what happens tomorrow and whether or not DIA will first tag the 407 level before sending bulls to the back kitchen at the steakhouse.

Today’s strong gap up exceeded SPX 5400, but we faded after this morning, unsurprisingly closing at 5375, below the middle Keltner channel we discussed yesterday. With VIX and VVIX flashing some warning signals, we need to take a closer look at what is likely in the near-term.

IWM’s performance Monday led us to correctly anticipate a rally today, though indices went even further than anticipated to the upside. With the VIX holding the 30-level and IWM now holding Keltner resistance and the 190 negative GEX cluster, what is likely to happen next?

GEX remains in firmly negative territory, and the gap down today solidified that SPX and QQQ may want to head for lower levels. That said, we see a slight uptick (or larger for IWM) in net GEX today, so perhaps we will see a bounce soon. We are in a short the rip environment, but if we see a rip coming, we don’t want to get in the way, either.

As we enter the week ahead, we make some chart observations pertaining to most of the major indices as well as the current GEX picture, which is sure to shift as we enter the May OpEx cycle between now and May 16 (May 21 for monthly VIX options). We anticipate important updates to this picture as soon as tomorrow, and certainly this week.

This will be the last newsletter until Sunday, given the holiday hours and closure of the market Friday. We’ve been warning of divergences since Sunday, and really became more focused on downside risk over the last two days, which seems to have been the right move as of today’s afternoon selloff. With SPX 5200 being tested and the Hull holding on the first test, what’s next?

VIX and VVIX are at an interesting spot as we approach VIX expiration in the morning, and we are already seeing a slight turn more deeply into negative territory for QQQ. Will we end up getting a pullback into Thursday instead of a rally?