The SPX closed higher for the week by +1.5% as monthly options expiration propelled price action into the large 5300 SPX strike price and pinned nearly perfectly. A common occurrence when volatility drops drastically, and the index is near all time highs and intraday day ranges shrink so that dealers have incentive to buy dips under that strike price while also selling into strength above that level to maintain their mandate of having an overall delta neutral risk profile. Moving on to the second half of May, which is now up +5.3% month to date after the FOMC day bear trap seen on 5/1, the attention now turns almost entirely to NVDA earnings which are due out 5/22 after the close. Also, somewhat notable that day is VIX options expiration at the open that morning. Often these VIX expirations can see volatility uptick or at least a trading range become unpinned. With breadth strong and macro headwinds abating as rates fall it points to dips getting bought and first support being seen at the 8 EMA of 5250 while stronger support would be at the 21-day EMA of 5190. A continued rally above 5300 can point to 5350 as that would equal SPY 535, which is now the new higher open interest gamma level that could be a target. NVDA earnings have high expectations, but it doesn’t feel quite as frothy as last quarter as the past two months has seen the stock provide a solid correction that tested and bounced from the YTD VWAP under 775. Now all eyes look ahead to the 1000 level on that stock which would likely see the Nasdaq and S&P follow suit to fresh highs. MACD on the SPX is in clear bullish mode and the RSI showing strength nearing 70.

Market Sentiment/Breadth

AAII sentiment for the week ending 5/15 showed bullish responses rise to 40.9% from 40.8% prior while bearish responses fell sharply to 23.3% from 23.8%. Neutral sentiment rose to 35.9% from 35.4%. The bull-bear spread (bullish minus bearish sentiment) increased 0.6 percentage points to 17.6%. The bull-bear spread is above its historical average of 6.5% for the second time in five weeks. The NAAIM Exposure index decreased slightly to 89.25 from 91.55 last week and is just above last quarter’s average of 87.84. Total equity fund flows for the week ending 5/8 had $-3.5 billion of outflows in equities. Friday’s close saw NYSE new highs at 188 while new lows of 25 and the 10-day MA of New High/Low Differential is positive at +172. The percentage of SPX stocks above their 50-MA is at 64.0% while those above their 200-MA was 80.2%. NYSI Summation index is above its 8-MA for a short term buy signal. NYMO McClellan Oscillator closed at +35 and fading back to Neutral. The cumulative AD line is making new highs above the 40 EMA short term breadth trend and above the 89 EMA long term bull signal. CBOE Equity P/C 50-day MA at 0.65. CNN Fear and Greed index is back in the Greed zone at 65 from 48 last week. The VIX/VXV ratio closed at 0.857. This measures the spread between 1- and 3-month implied volatility, above 1.0 exhibits fear and tends to mark a low.