Markets have been ripping higher on low volatility, but I’m still looking for one thing — a pullback. Not a crash, not a panic — just a gap fill. And if we get it, I’m ready to take some calculated stabs at new highs.
We’ve had a monster run lately. From Friday’s close to Monday’s open, the indexes gapped up big on the back of a China-U.S. headline about a 90-day pause for most tariffs.
Since then, the S&P 500, Nasdaq and Dow have all held those gains without much giveback. That’s the kind of setup that usually begs for a reset.
I’m Targeting a 3%-5% Drop — Then Reloading for Fresh Highs
This isn’t about being bearish. In fact, I’ve been bullish through most of this run. But you don’t get a steady move like this without leaving some inefficiencies behind — and those are the spots I’m watching.
Between SPY, QQQ, DIA and IWM, there are multiple unfilled gaps just waiting to get retested.
I think a shallow pullback of 3% to 5% would be completely healthy. I even mapped out scenarios where we drop as much as 10% and still remain in a longer-term bullish structure.
But realistically, a 3% to 5% move would be enough to fill those gaps and create some solid long setups into June.
This week’s expiration cycle might be the trigger. After May 16, we could see some downside flow from repositioning and hedging. If that happens, I’ll be watching for my waterfall income trades and possibly another one-one-one setup on SPY.
What I’m Looking to Trade
I already priced out a few options spreads — but the premium just isn’t there yet. I want a better entry and higher implied volatility before I pull the trigger. The June 30 expiration has potential, but I’d rather wait for a VIX spike and more favorable pricing before stepping in.
Until then, I’ve got my levels mapped out. If we get a dip toward that Friday-Monday gap — especially in SPY or QQQ — I’ll be ready to load up on some directional plays. For now, I’ll be patient and let the trade come to me.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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