CPI was lower
Market Commentary for May-10, 2023. Elaborated by the Point-Blank Trading team. Gamma data and charts from @TradeVolatility
Trading Map
At the time of writing this newsletter SPX is up 40 points after the CPI announcement. You will find strong resistance at 4150/4160. We took a futures position with the SPX at 4132 after the first 20 point move and closed it at 4150 to prepare for regular session trading.
As for trading map, we will be using the same box structure we have used this week. For those who don't have it we build them on a 5 minute chart of the SPX cash and the current box levels are: Top=4162.3 and Bottom=4145.1. You guys know what to do after there.
Market Breadth
In the past few days we pointed out the negative divergence between SPX and S5TH the index of SPX stocks that are above the 200DMA. We said that while SPX is relatively close to the February highs S5TH is not, in fact it is closer to the March lows and that while SPX has printed higher lows and higher highs since February, S5TH has printed lower lows and lower highs. Negative divergences also exist with S5FI, the index of SPX stocks above 50DMA. These divergences may last for months or may eventually be corrected, but they generally mark the path SPX will follow going forward.
Here's what the internal health of the indexes looked like yesterday based on these gauges.
As can be seen Nasdaq is the healthiest and SPX the weakest. We consider good health when more than half of each index is above the respective moving average.
For now the rally is fortunate that its leader, Nasdaq, especially Nasdaq 100 remains in its ascending channel, above all its moving averages and even above its own noise box, a consolidation zone where it has been since March.
As long as it stays that way, the rally can continue.
CPI
Most commodities are down substantially from their highs of last year, oil, natural gas, aluminum, iron ore, copper, timber, beef, soybeans, corn, wheat, milk, etc. with some exceptions such as cocoa and sugar, that should be reflected in the inflation index.
Gamma
The 9:08am ET GEX structure update shows resistance at 4160 and supports at 4130/4120 and finally 4100.
This structure may change as soon as the 0DTE options come into play today
GTH
Calls are much more active than puts in the premarket. Considering the amount of calls that are being traded above 4150, we can assume that if this trend continues at the market opening, the 4150 resistance could be broken and become support, initiating what could be a trending day
Trading
It seems difficult for SPX to break out of the noise box (4074-4181) today. Considering the bull and bear traps that the SPX has made at the top and bottom of the box the limits would be 4195 and 4070.
Today we expect a trending market and even though a good part of the move was made in premarket, there is still an opportunity to take a piece of the action.
There will be resistance at 4160, 4175 and 4180.
Support below 4150 is at 4130, 4120, 4110 and 4100.
Today's range should be between 4130 and 4195.
Have a profitable day.