Well it seems that the CPI report didn’t really bring any volatility or liquidity back into the market. Today felt like just another day, similar to what we have experienced for an entire week now. SPX had just about a 30 point range intraday, with the majority of that spent trading in an even narrower range.

SPX is literally stuck in the mud right now, just spinning the tires but gaining no ground. The huge 500 point move we saw to the upside about 10 days ago now has really sent the market into an extended state of exhaustion. As the week winds down, the expectation is that this sideways market just continues. PPI is tomorrow and while it is important, I don’t think it is as important as CPI to the average trader.

The last 5-6 daily candles all continue to trade in the same narrow range, extending the bull flag pattern on the daily chart. For the week, SPX is down just 9 points. The range seems to only be narrowing, not expanding. At a certain point, a break out obviously has to happen.

And even more obviously, no one truly knows when or where the breakout will occur, and in what direction. The highest probability trade is to likely trade the breakout, regardless of direction.

We’ve tracked the 15 minute chart over the past few days so I’ll continue with it. The grey box is where the majority of price action has occurred since we entered this price territory last Tuesday. While the volume hasn’t been high, it’s pretty obvious that the majority of supply in the market currently exists in this range.

The longer we stay in this range, just accumulating supply, the larger and more violent the breakout will be.

We just witnessed one of those large violent moves early last week. SPX was mostly range bound for weeks before that as we all remember, though the range was obviously much larger than it is now. The result was one of the largest gamma squeezes in history.

I am not saying that is what will happen this time, but we just have a recent example of what happens when SPX just gets stuck in a range. The magnitude of this is likely smaller unless we end up being stuck here for weeks, which I do think is unlikely.

In any case, this price range will eventually break and the gamma squeeze that follows will be an opportunity to capitalize on.

The market is stuck in a weird spot, where sentiment is still bullish but momentum and price action are not. We are seeing a rotation back into the AI trade, especially today with all the chip stocks, memory stocks and hyper-scalers all rallying big together. MAG 7 were weak as that rotation continues.

It’s been an incredibly boring market and I fear the rest of the week might look the same. I hope I am wrong and I hope some volatility comes back into the market. A sub 15 VIX is no fun for anyone.

Good luck!