ES Morning Update May 26th 2023

I never got filled on my short yesterday as I was gone most of it, so I wasn’t around to adjust it when the SPY got within inches of hitting the FP midday. But I’m fine with it as maybe we go up a little high now where I can get a better entry… who knows? I still think the upside is limited, but so is the downside… meaning we could stay rangebound between 4100 to 4200 on the SPX (about 15 points higher on the ES).

I’ll also point out that there’s no guarantee that the two day move down we just saw isn’t finished already, as it could be… I don’t know? Maybe it completed already in just one wave and won’t do an ABC down? Or the C wave doesn’t appear until many weeks into the future when no one see’s it coming?

There are many possible outcome here so it’s hard to know which one is going to play out. Overall though I think we’ll be in a range for awhile and I’ll try to figure out different ways to play it. If we get back down closer to 4100 I’ll look to sell some put spread to collect the premium below that area since I don’t think it’s going to collapse through it anytime soon.

If we get up closer to 4200 I’ll look to see a call spread above that zone since again… I don’t think we’ll go up much over it. These are SPX targets as that’s the instrument I trade, so it’s a little higher on the ES futures.

Finally, for the short term, I think we pullback some today to retrace maybe half of the move up from yesterday. For all practical purposes the FP on the SPY of 416.28 was hit when we spiked up to 416.16 yesterday afternoon. However, there’s a downside FP that appeared before the open Thursday that was at 412.28, which is about a 50% pullback I’d guess from the low on Wednesday to the high yesterday.

If this happens I’ll be looking at selling a put spread… as again, I think the market is going to be in a range now for several weeks playing more ping pong. From that downside FP I’d have to think we’ll turn back up after it’s hit, but I don’t see some big squeeze again… not anytime soon at least. One last thing… light volume is common around holidays and Memorial Day is next Monday, so we’ll only have a 4 day. Add that in with the uncertainty about the debt ceiling, and Janet Yellen talking about June 1st, this is another reason to expect a choppy market as traders don’t know what to do so they trade less. Have a great weekend.