SPX pushed to new all-time highs again today, inching closer to the 7200 level. The 7175 barrier has been broken and the path to 7200 has been opened. The expectation is still there that SPX reaches that level sometime this week, maybe even as early as tomorrow.

Coming into this week, we knew that there are some major earnings and an FOMC decision on Wednesday. Implied volatility continues to be elevated and VIX is still hanging around the 18-19 level today despite being red on the day. I suspect IV to stay high until Thursday/Friday.

The daily chart continues to inch upwards, though not at the same velocity as earlier in the month. The acceleration of the move has significantly dropped and it’s more of an exhaustive reach at this point. The chart paints a pretty clear picture in my opinion.

Momentum hasn’t gone away but it has slowed down. If we get some big green candles that shoot SPX well past 7200 in the next coming days, then that theory is obviously dead. But for now, it seems like the market is exhausted and starting to run on fumes.

The intraday price action has become much more choppy in the past week or so, and that’s where the ‘on fumes’ theory comes from. Zooming into the price action from the lows really highlights that. We had a clear upward trend for weeks, which came to a screeching halt last week as SPX grinded sideways and eventually fell out of the strong up trend.

The trend is still up, but not as strong. We can see the bull flag that SPX was caught inside of most of last week, and the breakout since then has been pretty flat as well. Yes, we reached new highs but barely. The days of 1-2% moves or larger seem to have disappeared.

Will good earnings or FOMC ignite the next fuse and SPX sky rockets to 7400? Maybe. This market is still looking for reasons to pump higher, so as long as it’s not horrible news, expect it to be taken in a bullish way and SPX just keeps on going.

No cracks in the foundation yet, but exhaustion is starting to creep in. The cycle is usually pretty scripted. Euphoria -> exhaustion -> cracks/weakness in the foundation -> pullback. Maybe there is another leg of euphoria, but it definitely won’t be anything close to what we just saw.

SPX closed slightly higher, but there were more stocks in it that were declining. This is textbook exhaustion. The market is still fueled by heavy retail call buying and a higher than usual call skew.

You can see from the screenshot below that the 1 strike out of the money calls are worth roughly 10% more than the 1 strike out of the money puts. This is a pretty heavy skew.

Stay bullish and keep buying the dip, but just realize that the returns might not be the same unless we get some surprising earnings.

Good luck!