 Everyone this is Mike of my capital with an update for Tuesday, May 16th It's around 6 p.m. New York time. So Markets today trade it mostly lower with the S&P 500 finishing down about 65 basis points We'll just start off with the S&P For the most part the S&P 500 has been very well contained Really if you go back since April 3rd, we haven't really seen the S&P 500 materially try to break much above 4150 that sort of been the upper bound that's been the upper under the range There was this one brief stent to 4180 one reason for this is again because of option positioning the call wall Which is the level with the greatest call gamma has been firmly planted at 4200 now for several weeks And this is one of the reasons why you know, I've been and and I've continued to be in this idea that you know There really isn't much upside in this market because the call wall Is really what's kind of keeping a lid on on the market from pushing higher and at this point With option expiration coming on Friday, we're likely coming to an end of this period of stagnation in the market I think we're going to see also an increased period of volatility Coming Potentially as early as tomorrow given that tomorrow we're going to get VIX option expiration And that's going to free the VIX to really begin to start trading more freely again Once we get past that period of time because again the VIX has seen it's put wall down at the 17 level As long as as well as a big gamma level around the 17 level and that sort of has kept the VIX while well contained at around 17 the interesting thing about the VIX today is if you notice that the VIX very much is kind of top each time around 18 1820 or so we got there today So you'll want to watch the 18 level on the VIX tomorrow if it spikes You're going to get a pretty you could potentially get a pretty sharp move up in the VIX because you can see that once it's gotten Beyond this 18-ish level on a couple of occasions. This led to some big spikes Also, you've seen the VVIX which is the volatility of the VIX moving higher as well And sometimes this can be a leading indicator For the VIX moving higher as implied volatility or expectations of higher implied volatility begin to filter through the market And so when we look at the S&P given that we have this bearish formation and this diamond pattern Given that VIX option expiration comes tomorrow and that could free the VIX to trade More freely given that we could see gamma levels decline pretty significantly Going into Friday and beyond you're going to see this trading range begin to loosen up and begin to trade You're going to see this range really begin to shift now the pattern here is a diamond pattern and diamond patterns are you know technically In this case, it's a bearish reversal pattern diamond patterns can also serve as bullish reversal patterns But given that this move was higher we've been solidating sideways very much in what appears to be a distribution pattern Suggests that the next move in the market is going to be down and that would be it should lead to a retracement of this entire Rally is what this pattern calls for Again, we'll have to take this step by step and day by day But the immediate target that I would be looking for in the S&P 500 is for a gap filled down to this 4060 region And depending upon how this formation forms if we were to gap lower tomorrow and then trade down to 4060 That would actually create an island reversal pattern up here And that would also be an indication that perhaps there's actually even further to decline in the index Again when we're starting to go through and you start looking at other parts of the market remember yesterday We were talking about the Dow and looking at some of the components while we had Home Depot report results today And that was down about 2% and it was one of the reasons why you saw some extra weakness in the Dow You are going to be getting you know more earnings from some of these Retailers like Target and Walmart and although they're not obviously all in the Dow. There's only 30 companies in the Dow It's worth being aware at least that there could be some added pressure to some of this retail space Due to the due to what we're gonna starting to see from these retailers and especially we have to be curious to see what they're what their Margins are gonna look like you can see Walmart is in the Dow. And so it's worth keeping an eye On these things you also have Walgreens in the Dow as well And so, you know if you were to begin to see you know margin compression It could lead to Further underperformance by the Dow Jones industrial average. And so you can see really the big level of support right here 32,968 or so that's really the level if that breaks Specifically if we were to gap lower tomorrow below this region of support I think that's gonna probably signal significantly lower prices for the Dow to finally come as well And so that's sort of where we are with with these markets at this point if we look at the NDX You can see the NDX today kind of grazed the upper trend line hugged it We tried to get above it and we came back down through it Tomorrow you're gonna want to see where the NDX goes, you know, was this sort of just a bump out Was this a fake out? Are we gonna continue to trade lower tomorrow in the NDX? You know, you have to think that if you're going to start seeing the SMP and the NAS and the Dow begin to give way Which is what their technical charts are saying then you're gonna see the same thing in the NASDAQ 100 So again, here's your uptrend that you need to keep an eye on probably around the 13,000 375 to 13,400 region is the level you're gonna want to watch because of that breaks That's gonna signal that the uptrend the least the uptrend portion of the rising wedge pattern has broken and that you're likely to see lower prices in a trade down to around 13,200 or so and it is important There is a gap that is also here that needs to be filled and this type of pattern is sometimes, you know You can see the whole pattern also be erased and trading all the way down to 12,950 or so again if this is that that bearish rising wedge pattern that we're seeing and I have reasons to think That you are gonna see the market trade lower. You saw the tip ETF also move down today You're seeing real yields moving higher. You saw the TLT today drop below that support level. We've been watching Again at this 103 ish area. You're gonna want to see the TLT stay below 103 if the TLT is staying below 103 that means yields are rising that's gonna further pressure You know stocks as well The other thing that was really interesting today is you saw high yield stocks really starting to get hit a little bit The HYG today came down pretty significantly You can see right here Again, you're gonna want to watch the HYG because there is a gap to fill at 73 36 one thing you can do to keep us an eye on spreads is you take the SHY and divide it by the HYG and that will give you sort of a similar comp to what the CDX high yield CDSI Spread is on the index and this why this is important is because what you find is that implied volatility trends to trade with Changes in this in these high yield spreads high yield spreads today up 14 points to 510 and you can see the relationship with the blue line Being the VIX and the white line being the high yield spreads You can see high yield spreads have been moving higher VIX hasn't really paid much attention to it But again, you're gonna get through option expiration tomorrow if this high yield spreads starts trading up You're gonna start seeing the VIX trading up and although you may not have access to that You can kind of supplement it with this SHY HYG ratio I've been using it now for some time to as a supplement I'll show you you can just do an overlay of the two and it gives you a pretty good Sense of what's happening with some of these high yield spreads and what's what's taking place there And that's another reason why you saw You know the market sell off later today as well because you saw these high yield spreads Begin to widen as you went into the end of the day. Here's your ratio And you can see that again it pretty much mimics what's happening in this spread So it's a good easy way in a cheap way if you don't have access to the data to keep track of what's happening And again, if you're gonna start seeing the spread move higher one would expect the implied volatility To move higher as well So again, this is sort of where we are at this point I think you know, you have the dollar index which continues to look fairly strong You're gonna want to see if the dollar can manage to get past this 103 region if it gets past 103 I think it has room to run probably up to 105 You can see that in the euro as well the euro is kind of holding the 108 region once the euro breaks There's not going to be much to Support it and then finally one sector you may want to keep an eye on is the industrials the XL I Has been has really been a beneficiary of the weaker dollar if you see the dollar Really beginning to strengthen you're gonna want to watch the XL I because it's probably going to start declining and remember industrials can do a little bit better Especially if they're export oriented on a weaker dollar it can help boost their revenue and earnings the dollar starts to strengthen It makes their goods overseas a little bit less competitive So that would be one reason why you might see If the dollar continues to strengthen one reason why you may see the industrial sector Really start underperforming as well. So this is where we are right now Again, hope hope this finds you well, and I'll see you soon. Bye