Macro Theme:

 

 

Short Term SPX Resistance: 5,165 (SPY 515)

Short Term SPX Support: 5,100

SPX Risk Pivot Level: 5,000

Major SPX Range High/Resistance: 5,200 (SPX Call Wall)

Major SPX Range Low/Support: 4,800

‣ For the week of 5/5 we see few catalysts, which should lead to contracting volatility, and upside equity drift.

-5,165 (SPY 515) short term resistance, with 5,200 is major resistance into OPEX week.

-5,100 is short term support. A break <5,100 pushes the S&P into a more fluid zone, wherein 5,000 is major support.

‣ 5/22 NVDA earnings, which follows 5/17 OPEX, should be a major turning point for equities.

*updated 5/5

 

 

Founder’s Note:

ES futures are +30bps to 5,170. NQ futures are +25bps to 18,045.

Key SG levels for the SPX are:

• Support: 5,100, 5,065, 5,000
• Resistance: 5,150, 5,165
• 1 Day Implied Range: 0.63%

For QQQ:

• Support: 430
• Resistance: 430, 438, 440

IWM:

• Support: 200
• Resistance: 210

So….now what? Bears seem to have lost near-term catalysts, which clears the air for short volatility players.

To the point on catalysts, the economic calendar is rather quiet this week, with no major events anticipated. There are several Fed speakers and Treasury auctions, but those most often pass without issue.

Since posting long term highs, implied volatility [IV] has all been but drained off, with the SPX term structure now plastered to the bottom of the 90 day range, as seen below. This particularly low <=5DTE IV backs the lack of events in the week ahead. It also backs traders running away from downside hedges. Lastly, it backs the idea that, for bulls, vanna flows have nothing left to give as IV contracts to a contracting realized volatility.

We’ve got 2 weeks to May OPEX, which lines up with PPI & some inflation data (5/15, 5/15), making that window more available for volatility to increase.

For this week we favor “drift higher”, with moderate resistance at 5,150 – 5,165, and more formidable resistance at the 5,200

Call Wall.

Bulls have control while SPX >5,100.

To the downside 5,100 should be solid support, but below there price could move fluidly back to the major, long term 5,000 support line.

A sleepy S&P signals traders may want to focus on single stocks, and possibly IWM, which looks like it has a higher ceiling (210) vs other major indices (SPY, QQQ).

Chasing into single stocks is broadly favored by traders, too.

Starting with basic single stock call vs

put volume,

you can see

call volumes

rebounding from the big put ratios we saw into April lows (see note here).

Here we plot skew rank vs IV rank, with the most bullish positioning reflected by stocks in the top left of the chart. This tells us that volatility is low (IV Rank), and calls are being favored (Skew rank). Bearish positions would show the red cloud toward the bottom right.

As we think its a quiet week, we see no reason for single stock traders to back down from bidding. OPEX week, with incoming inflation data could lead to some short term reversion, and then the market will shift to the major data point of NVDA earnings on 5/22. That should be a major catalyst into June.