High volume is what leads to volatility. Just means the expected ranges for day, week, month are wider. If the market is not positioned for a high volume day in their vol positioning, this could lead to big liquidation type movements.
Given that vol expectations are trending lower on almost every metric, but RVOL is trending higher, I think this means we are in for either a regime shift soon or a continuation of the present one. At the moment it appears there is an equilibrium at a time when there could potentially be larger than normal volumes.
With that being said, I am prepared for some more sell the pop type and buy the dip action.
Technically, SPX is stuck between the 20dma at 5085, the 50dma at 5100, and the 4985 200dma below us. With 60% of S&P stocks below the 20dma and 50dma, this gives odds to the bears until we start chipping away again at the 200dma. Given AAPL was up 6% and ES only managed a 30 pt rally which was sold off.
The daily bear flag we’ve been tracking is intact but they did manage to trap some folks below the major support line. This makes me cautious of any kind of trend day to the downside and supports the idea of a 2 way action.
So based on today’s positioning and the context above, I think we will see an attempt at this overhead daily moving averages and a failure. Our main gamma wall today is 5100, this would be a draw early and potentially a fade. I’m always more cautious on fading a positive gamma wall than a negative one. If we are shifting to a new vol regime, which is a fairly strong possibility, they will try to pin this market up around 5100 just like they did last Friday.
If they can break this 5070 early, I would not be surprised at another attempt at this 5000/5010 area but for support to come in as folks offloaded their puts into a down move. Keep an eye on VIX if this can get some momentum than I would be open to a break of this 5000 as bears would like to close it below here on the week for confirmation of sell in may and go away.
Levels for SPX
