u/Hungry-Command-8454

Posted about this before. Bought a Jun 20 720/700 put spread when SPY was at 738 on the breadth divergence. 53% above the 200 day at record highs, PPI at 6%, rate hike odds climbing to 39%. Thesis was a pullback to the 20 day around 702.

SPY hit 744 today. Spread is bleeding. Not posting copium about how it just needs time. Instead want to lay out something I've been digging into this week that wasn't in my original setup.

M2 money supply is at $22.6 trillion. New all time high. Growing 4.8% year over year after contracting in 2022-2023 for the first time since the 1930s. The Fed is doing $40 billion a month in Treasury purchases they're calling "Reserve Management Purchases." That's QE. They just gave it a new name so nobody would write the headline. Bank deposits up $611 billion since December per Fed balance sheet data that Benzinga pulled on Monday. That is a stupid amount of new liquidity in 5 months and it explains why this thing keeps going up on days when 6% PPI should be sending it lower.

The breadth narrative I built the trade on also has a hole in it. StockCharts ran a piece this week showing the Value Line Arithmetic Index is beating SPY year to date. The "two thirds red" stat from Wednesday was one session. Over the quarter the average stock is doing fine.

Tudor Jones said 1999. I quoted it. Didn't include him saying the rally could run another one to two years before peaking. That's a relevant detail when you're holding puts that expire in 5 weeks.

Closing half the spread tomorrow. Keeping the other half through NVDA earnings because if Jensen misses at these levels with the semis up 65% year to date, it's still going to be ugly. But the liquidity backdrop isn't something I had in my model and it shifts the probability enough that full size on the short side doesn't make sense anymore.

Everyone is focused on CPI right now because of yesterday's 3.8% print. Fair enough. But the producer side of the equation is where you actually see inflation forming before it shows up at the register. PPI drops in about an hour and there are 3 things I've been watching that most people aren't connecting.

First, Brent averaged $117 a barrel in april. That's not a march story anymore. March PPI already showed energy up 8.5% and gasoline up 15.7%, and april was significantly worse. Crude peaked at 138 on april 7th. The strait of hormuz is still effectively closed. Diesel hit 5.80 a gallon. Jet fuel is tracking even higher. This is not a one month blip, this is the pipeline repricing in real time.

Second, ISM manufacturing prices paid just printed 84.6. That's not an energy-only reading. Steel hit 1,083 a ton in april, highest since early 2024. Basic organic chemicals are surging because they're derived from petrochemical feedstocks. When ISM prices are above 80 it has historically meant core goods PPI is running way hotter than people expect. And this month every single one of the 18 service industries in the ISM services survey reported rising prices. All 18. That almost never happens.

Third, and this is the one nobody is pricing, transportation costs are about to blow a hole in services PPI. March already showed transportation and warehousing services up 1.3%. Fuel surcharges reprice with about a 30 day lag. April diesel at 5.80 means every trucking contract, every air freight invoice, every rail shipment got more expensive in april. Services are 65% of PPI final demand weight. When transportation starts pulling services PPI higher it mathematically moves the headline number way more than another 10% in gasoline does.

The market sold off yesterday on CPI and is just vibing on Jensen going to China today. PPI this morning might remind people that the inflation is still forming upstream and hasn't even fully passed through yet.

Only 51.2% of S&P stocks are above their 50 day moving average and 53.2% are above their 200 day. At all time highs. The only other time since 1996 that the S&P was at records with fewer than 60% of stocks above both their 50 and 200 day moving averages was December 1998 through March 2000. You know, right before the whole thing cratered.

CPI came in at 3.8% yesterday. Core at 2.8%. Oil settled above $102. Rate cuts are completely off the table through 2027 according to CME futures. Rate hike odds by december are now above 30%. And SPY is at 738 today, basically flat, 0.2% from the high it set Monday.

The semis got wrecked yesterday. INTC down 8%, QCOM down 13%, the iShares semi ETF down 5%. These are the same names that dragged the index to records last week. Michael Burry came out over the weekend calling it a bubble. Einhorn at the Sohn Conference yesterday said stocks are "very, very pricey." The consumer discretionary equal weight index is down 12% from its early 2026 high while the cap weighted S&P makes new records. That's not a healthy market, that's seven stocks on a sugar rush.

NVDA earnings May 20. OPEX Friday. If Nvidia misses or even just meets expectations without a blowout guide, the entire AI carry trade unwinds into an OPEX week with negative gamma below 710. The 20 day is around 702. The 50 day is around 680. That's a long way down and there's not much in between.

I've got a small Jun 20 720/700 put spread on from yesterday. Defined risk, catches the 20 day. If NVDA crushes it and Iran somehow resolves I lose the premium. But the setup where 18% of the S&P is semis and the last time breadth looked like this was the dot com peak, I'll take that bet at these prices.

The April CPI report came in yesterday at 3.8% year over year. Highest since May 2023. Energy up 17.9%. Gasoline up 28.4% annually. Beef up 14.8%. Airline fares up 20.7%. Core came in at 2.8%, the highest monthly reading since January 2025. Real wages fell, both monthly and annually.

And the S&P closed down 0.16%.

Oil settled at $102.18 a barrel yesterday. That's the first triple digit close since 2022. Hormuz is still disrupted. Trump said the ceasefire with Iran is "on life support." And the market just kind of shrugged. Nasdaq fell 0.7%, mostly because semis gave back some of their insane run. Qualcomm dropped 13%, Intel 8%.

The thing that bothers me isn't the red day. It's how small the red day was. 3.8% CPI, oil above 100, rate hike odds now at 1 in 3 by december per CME, zero chance of cuts through 2027, and the index is still within 0.2% of its all time high. Either the market is right that this is all transitory war noise or we're watching the biggest game of chicken with inflation since 2022.

The Cleveland Fed president called this "the fourth shock in five years" after the pandemic, Russia, and tariffs. Morningstar's chief economist said rate hike odds while still under 50% are rising. Mark Zandi at Moody's said households are going to struggle "for the foreseeable future." Real wages falling while the stock market sits at all time highs is the kind of disconnect that eventually resolves and usually not in stocks' favor.

I'm not panic selling. But I trimmed my equity allocation by about 15% last week into short duration treasuries and I'm glad I did. NVDA reports May 20 and FOMC is June 16. If earnings hold up and Iran de-escalates, fine, I rotate back and miss a few percent. But if this inflation keeps running with oil above 100 and the Fed starts seriously talking about hikes, I don't want to be fully invested at 7400 on the S&P with 53% breadth.

Setup going into tuesday morning. SPY at 738 right at the top of its range. Put/call open interest ratio at 2.18, which is the highest it's been in months. 12.6 million put contracts open versus 5.7 million calls. Institutions are hedged to their eyeballs and price just keeps grinding up anyway.

The call wall is right around 740. We kissed 740.75 today and got rejected. That's not random, that's dealer gamma pinning. Above 740 you get a squeeze because dealers have to buy to hedge. Below about 710-715 this whole thing unwinds the other way and dealers start selling into weakness.

Now drop CPI into the middle of that tomorrow at 8:30. Oil at 98. Gas prices through the roof. Core was 2.6 last month and the oil passthrough hasn't even fully hit yet. If it prints hot, say anything north of 2.8, rate cut hopes for September are done and the 740 wall becomes a ceiling for a while. If it comes in cool somehow, 745-750 is in play by end of week.

The 20 day is way down at 702. The 50 day at 680. That's a long way to fall if something actually goes wrong. We're 5% above the 20 day and 8.5% above the 50 day. That kind of extension doesn't snap back gently.

I'm looking at the Jun 20 720/700 put spread if CPI is hot. Defined risk, catches the 20 day as a target, quad witching expiration so max liquidity. If CPI is tame I'm staying out and waiting for the FOMC cluster in mid june.

Crude is at 98 bucks. Gas is over 6 dollars in half the country. The strait of hormuz is still disrupted. Trump rejected Iran's latest peace proposal today. And the S&P 500 closed at an all time high on friday for the sixth week in a row.

Amrita Sen from Energy Aspects went on CNBC last week and called this "extremely misplaced euphoria" and said we're sleepwalking into a recession. Morgan Stanley's chief europe economist said we're "nearing a day of reckoning." These are not perma-bears, these are energy market specialists who watch supply flows for a living.

The bull case is all earnings. 29% Q1 growth, 78% beat rate, great. But that was last quarter. Oil was at $85 for most of Q1. It's been $95-100 for the last 3 weeks. That feeds into transport, logistics, manufacturing, food production. None of that shows up until Q2 and Q3 numbers.

CPI comes out tomorrow. Core was 2.6% last month. Polymarket has traders watching for a possible reacceleration toward 3.7% when the oil passthrough hits. The Fed is at 3.50-3.75 with a 96% chance of holding in June. If CPI comes in hot, the one remaining cut everyone's hoping for in September evaporates.

I'm not selling everything. But I moved about 15% of my equity allocation into short duration treasuries last week. If oil cools and Iran resolves, I'll rotate back and miss a couple percent upside. If it doesn't, I'll be glad I have the dry powder. The risk reward just feels off when crude is doing what it's doing and the index is pretending it isn't happening.

733 close today. New ATH. Fifth straight green week. Oil dropped 7% on iran deal hopes and semis carried everything
We just ran 10% in a month with basically no pullback. RSI at 68. And now the calendar gets heavy. NFP friday, CPI the following tuesday, gas still over $6, and the iran deal isn’t even signed yet. Trump literally said today “perhaps, a big assumption” that Iran agrees

Soft payrolls friday probably get shrugged off because everything is getting bought right now. But a hot CPI with gas where it is kills whatever rate cut hopes are left. Fed already pricing 70% hold for june

Picked up some 720p 5/16. Small. Not trying to call a top but the 20 day is down around 702 and we haven’t been near it in weeks. If we gap through 740 on NFP I’ll cut it

Buyback blackout ends around the 14th so even if there’s a dip it probably gets bought hard once corporates come back

SPY hit an all-time high friday. did it on 16 million shares. 20-day average is 50 million.

april closed as best month in 5 years (+10%). earnings are crushing. 84% beat rate, 27.8% growth. apple beat and popped 3.5%

but under the hood

- only 53.67% of S&P stocks above their 200 day MA. at a real ATH you'd expect 70-80%+
- decliners outnumbered advancers 1.5 to 1 this week. index went up while most stocks went down
- 4 FOMC members dissented wednesday. most since 1992. rate hike odds went from 0% to 9%
- oil at $102.50. strait of hormuz still closed. CPI drops may 13 with a full month of $100+ crude baked in
- SPY put/call OI ratio sitting at 2.2. institutions hedging like it's late cycle

none of this means it drops monday. credit spreads are tight, buyback windows reopening (~$1T annual pace), earnings are objectively great

but the gap between what the index says and what's happening underneath is wide right now. either breadth catches up or the index catches down

what's your read

SPY hit an all-time high friday. did it on 16 million shares. 20-day average is 50 million.

april closed as best month in 5 years (+10%). earnings are crushing. 84% beat rate, 27.8% growth. apple beat and popped 3.5%

but under the hood

- only 53.67% of S&P stocks above their 200 day MA. at a real ATH you'd expect 70-80%+
- decliners outnumbered advancers 1.5 to 1 this week. index went up while most stocks went down
- 4 FOMC members dissented wednesday. most since 1992. rate hike odds went from 0% to 9%
- oil at $102.50. strait of hormuz still closed. CPI drops may 13 with a full month of $100+ crude baked in
- SPY put/call OI ratio sitting at 2.2. institutions hedging like it's late cycle

none of this means it drops monday. credit spreads are tight, buyback windows reopening (~$1T annual pace), earnings are objectively great

but the gap between what the index says and what's happening underneath is wide right now. either breadth catches up or the index catches down

what's your read

four mega-caps reported wednesday night. two got punished hard (MSFT -5% on $190B capex guide, META -9% on spending hike). two crushed it (GOOG cloud growth, AMZN massive EPS beat). then thursday CAT +10%, LLY +7%, QCOM +16% picked up the slack. SPX closed 7,209.

the part that actually matters: russell 2000 led the day at +2.21%. small caps outperforming mega-caps at an ATH is exactly the breadth signal you want to see. VIX collapsed 10%.

after hours AAPL beat across the board. rev +17%, gross margin 49.3% vs 48.4% expected, $100B new buyback. +3% AH.

the rally found legs outside of big tech. industrials, pharma, chips, small caps all contributing. that’s healthier than anything we’ve seen in months.

Anyone disagreees and thinks we have a mean inversion after this insane run up instead?

four mega-caps reported wednesday night. two got punished hard (MSFT -5% on $190B capex guide, META -9% on spending hike). two crushed it (GOOG cloud growth, AMZN massive EPS beat). then thursday CAT +10%, LLY +7%, QCOM +16% picked up the slack. SPX closed 7,209.

the part that actually matters: russell 2000 led the day at +2.21%. small caps outperforming mega-caps at an ATH is exactly the breadth signal you want to see. VIX collapsed 10%.

after hours AAPL beat across the board. rev +17%, gross margin 49.3% vs 48.4% expected, $100B new buyback. +3% AH.

the rally found legs outside of big tech. industrials, pharma, chips, small caps all contributing. that’s healthier than anything we’ve seen in months.

Anyone disagreees and thinks we have a mean inversion after this insane run up instead?

we just had the most loaded 24hrs of the quarter. fed split 8-4 (worst since 1992), trump killed the iran deal, oil ripped to $120, and four mag 7 names reported in an 80-second window after the bell.

today at 8:30 we get GDP + PCE at the same time, then apple after close.

bull case: gdp above 2.5%, core pce stays at or below 3.0%, apple beats tonight. if all three hit, the market continues uptrend and bears have nothing left to shoot at. spy clears 720 and we grind to 7200+ on the s&p.

bear case: core pce ticks above 3.1% today, then april cpi on may 13 confirms headline above 4%. now you've got rising inflation + a fed that just had its worst internal split in 34 years + a new chair with zero credibility + $120 oil + the strait of hormuz still closed.

which do you think happens?

we just had the most loaded 24hrs of the quarter. fed split 8-4 (worst since 1992), trump killed the iran deal, oil ripped to $120, and four mag 7 names reported in an 80-second window after the bell.

today at 8:30 we get GDP + PCE at the same time, then apple after close.

bull case: gdp above 2.5%, core pce stays at or below 3.0%, apple beats tonight. if all three hit, the market continues uptrend and bears have nothing left to shoot at. spy clears 720 and we grind to 7200+ on the s&p.

bear case: core pce ticks above 3.1% today, then april cpi on may 13 confirms headline above 4%. now you've got rising inflation + a fed that just had its worst internal split in 34 years + a new chair with zero credibility + $120 oil + the strait of hormuz still closed.

which do you think happens?

openai missed their numbers + the AI trade is shaky

wsj reported openai's revenue and user growth came in below their own targets, anthropic and gemini apparently eating their lunch since late 2025. their cfo flagged concerns about funding future compute deals. nasdaq dropped 1.1%, softbank tanked 10%, every chip stock got hit.

this is the first real crack in the AI capex story thats been driving the entire rally. semis up 33% in 3 months on that narrative alone. msft, google, amazon, meta all report tonight.

iran situation getting worse (?)

iran offered to reopen hormuz if nuclear talks get deferred, trump said no, iran re-closed it again. march cpi already spiked to 3.3% almost entirely on energy. if hormuz stays closed the may 12 cpi print could come in above 3.5%, thats probably the most dangerous data point in the next 45 days. consumer confidence at a 48 year low, inflation expectations jumped from 3.8% to 4.8% in one month

goodbye powell + his replacement just killed rate cuts

todays fomc is likely powell's last. warsh cleared his final hurdle over the weekend, senate banking committee voting on confirmation this morning. at his hearing he said "the president never asked me to commit to rate cuts" and markets believed him. fedwatch shows basically zero chance of more than one cut all year. warsh also wants to ditch forward guidance, stop regular press conferences, revert to strict 2% targeting.

(mid term) buybacks about to come back

$1.2T in share repurchase authorizations for 2026, biggest on record. most companies in blackout right now because of earnings season but windows start reopening mid-may. credit spreads are near 25 year tights which means the bond market isn't worried about systemic risk at all. so even if we get a pullback its probably 3-5%, not 10%+. the largest buyer in the market is about to flip back on

openai missed their numbers + the AI trade is shaky

wsj reported openai's revenue and user growth came in below their own targets, anthropic and gemini apparently eating their lunch since late 2025. their cfo flagged concerns about funding future compute deals. nasdaq dropped 1.1%, softbank tanked 10%, every chip stock got hit.

this is the first real crack in the AI capex story thats been driving the entire rally. semis up 33% in 3 months on that narrative alone. msft, google, amazon, meta all report tonight.

iran situation getting worse (?)

iran offered to reopen hormuz if nuclear talks get deferred, trump said no, iran re-closed it again. march cpi already spiked to 3.3% almost entirely on energy. if hormuz stays closed the may 12 cpi print could come in above 3.5%, thats probably the most dangerous data point in the next 45 days. consumer confidence at a 48 year low, inflation expectations jumped from 3.8% to 4.8% in one month

goodbye powell + his replacement just killed rate cuts

todays fomc is likely powell's last. warsh cleared his final hurdle over the weekend, senate banking committee voting on confirmation this morning. at his hearing he said "the president never asked me to commit to rate cuts" and markets believed him. fedwatch shows basically zero chance of more than one cut all year. warsh also wants to ditch forward guidance, stop regular press conferences, revert to strict 2% targeting.

(mid term) buybacks about to come back

$1.2T in share repurchase authorizations for 2026, biggest on record. most companies in blackout right now because of earnings season but windows start reopening mid-may. credit spreads are near 25 year tights which means the bond market isn't worried about systemic risk at all. so even if we get a pullback its probably 3-5%, not 10%+. the largest buyer in the market is about to flip back on

openai missed their numbers + the AI trade is shaky

wsj reported openai's revenue and user growth came in below their own targets, anthropic and gemini apparently eating their lunch since late 2025. their cfo flagged concerns about funding future compute deals. nasdaq dropped 1.1%, softbank tanked 10%, every chip stock got hit.

this is the first real crack in the AI capex story thats been driving the entire rally. semis up 33% in 3 months on that narrative alone. msft, google, amazon, meta all report tonight.

iran situation getting worse (?)

iran offered to reopen hormuz if nuclear talks get deferred, trump said no, iran re-closed it again. march cpi already spiked to 3.3% almost entirely on energy. if hormuz stays closed the may 12 cpi print could come in above 3.5%, thats probably the most dangerous data point in the next 45 days. consumer confidence at a 48 year low, inflation expectations jumped from 3.8% to 4.8% in one month

goodbye powell + his replacement just killed rate cuts

todays fomc is likely powell's last. warsh cleared his final hurdle over the weekend, senate banking committee voting on confirmation this morning. at his hearing he said "the president never asked me to commit to rate cuts" and markets believed him. fedwatch shows basically zero chance of more than one cut all year. warsh also wants to ditch forward guidance, stop regular press conferences, revert to strict 2% targeting.

(mid term) buybacks about to come back

$1.2T in share repurchase authorizations for 2026, biggest on record. most companies in blackout right now because of earnings season but windows start reopening mid-may. credit spreads are near 25 year tights which means the bond market isn't worried about systemic risk at all. so even if we get a pullback its probably 3-5%, not 10%+. the largest buyer in the market is about to flip back on

Just my daily thoughts.

What looks good on the surface:

• S&P 500 at record highs, up +10.8% in one month
• Price above all major moving averages (20/50/200day)              
• Credit markets calm: high yield spreads at 286 bps, nowhere near stress levels                         
• NYSE advance/decline line confirmed new highs

                                                 

What's actually happening underneath:

• Only 55% of S&P 500 stocks are above their 200day MA. in a healthy rally this should be 70-80%+
• Only 50% are above their 50-day MA. barely half the index is participating
• Volume is collapsing on up days: 93.6M (Apr 8) -> 30M (Apr 28). that's 39% of the 20day average
• RSI at 70.67 (overbought), stochastic pegged overbought for 13 straight days
• A handful of sectors are carrying everything: Tech (74%), Financials (88%), Consumer Discretionary (80%). Meanwhile Energy (14%), Utilities (13%), Consumer Staples (26%) are getting left behind
• Insiders are selling at well above historical averages (buy/sell ratio at 0.24 vs 0.34 median)

Why the next 3 weeks matter (Apr 29 - May 15):            

• Apr 29: FOMC decision + GOOGL, MSFT, META, AMZN earnings all on the same day
• Apr 30: AAPL earnings + Q1 GDP report
• May 12: April CPI (risk of hot print from oil at $101/bbl)       
• May 14-15: Trump-Xi summit in Beijing
• May 15: Monthly options expiration (gamma unpin)

             

Just my daily thoughts.

What looks good on the surface:

• S&P 500 at record highs, up +10.8% in one month
• Price above all major moving averages (20/50/200day)              
• Credit markets calm: high yield spreads at 286 bps, nowhere near stress levels                         
• NYSE advance/decline line confirmed new highs

                                                 

What's actually happening underneath:

• Only 55% of S&P 500 stocks are above their 200day MA. in a healthy rally this should be 70-80%+
• Only 50% are above their 50-day MA. barely half the index is participating
• Volume is collapsing on up days: 93.6M (Apr 8) -> 30M (Apr 28). that's 39% of the 20day average
• RSI at 70.67 (overbought), stochastic pegged overbought for 13 straight days
• A handful of sectors are carrying everything: Tech (74%), Financials (88%), Consumer Discretionary (80%). Meanwhile Energy (14%), Utilities (13%), Consumer Staples (26%) are getting left behind
• Insiders are selling at well above historical averages (buy/sell ratio at 0.24 vs 0.34 median)

Why the next 3 weeks matter (Apr 29 - May 15):            

• Apr 29: FOMC decision + GOOGL, MSFT, META, AMZN earnings all on the same day
• Apr 30: AAPL earnings + Q1 GDP report
• May 12: April CPI (risk of hot print from oil at $101/bbl)       
• May 14-15: Trump-Xi summit in Beijing
• May 15: Monthly options expiration (gamma unpin)

             

Just my daily thoughts.

What looks good on the surface:

• S&P 500 at record highs, up +10.8% in one month
• Price above all major moving averages (20/50/200day)              
• Credit markets calm: high yield spreads at 286 bps, nowhere near stress levels                         
• NYSE advance/decline line confirmed new highs

                                                 

What's actually happening underneath:

• Only 55% of S&P 500 stocks are above their 200day MA. in a healthy rally this should be 70-80%+
• Only 50% are above their 50-day MA. barely half the index is participating
• Volume is collapsing on up days: 93.6M (Apr 8) -> 30M (Apr 28). that's 39% of the 20day average
• RSI at 70.67 (overbought), stochastic pegged overbought for 13 straight days
• A handful of sectors are carrying everything: Tech (74%), Financials (88%), Consumer Discretionary (80%). Meanwhile Energy (14%), Utilities (13%), Consumer Staples (26%) are getting left behind
• Insiders are selling at well above historical averages (buy/sell ratio at 0.24 vs 0.34 median)

Why the next 3 weeks matter (Apr 29 - May 15):            

• Apr 29: FOMC decision + GOOGL, MSFT, META, AMZN earnings all on the same day
• Apr 30: AAPL earnings + Q1 GDP report
• May 12: April CPI (risk of hot print from oil at $101/bbl)       
• May 14-15: Trump-Xi summit in Beijing
• May 15: Monthly options expiration (gamma unpin)