Monday Market Momentum
RLT Newsletter 5.4.26
With stocks extremely extended after a historic move higher, traders are asking what could possibly bring this market down.
Most would point to something like an oil supply shock. Others will say everything is priced for perfection and any small disruption could trigger outsized volatility. With rate cuts no longer right around the corner, bond yields pushing higher, and oil staying elevated, there is clearly some inflation risk being priced in by the bond market that equities are ignoring. Whether equities actually start to care about that is a completely different question.
There is always a bearish narrative sitting in the background, ready to be pulled forward the moment price starts to falter. And that’s really the key point.
The real risk to any market is not the next headline. It’s the loss of key levels.
Headlines tend to follow price, not lead it. The market decides which narratives matter based on what price is doing. If we push into resistance, stall, and then break down through key levels, that’s when narratives suddenly “matter.” In reality, what likely happened is that larger players were distributing into strength, and once that supply overwhelms demand, price breaks and the story gets attached after the fact.
Yes, elevated oil and a 20-year yield pushing above 5 percent can absolutely create the conditions for a larger pullback. But constantly trying to predict which narrative will be the trigger is mostly a waste of time.
That’s why I stay focused on price and key levels.
Right now, the main level I’m watching across most charts is last week’s pivot and Thursday’s low. On SPY, call it roughly $709 for simplicity. If that level continues to hold, this short-term trend likely keeps grinding higher as traders chase price. If we lose it, the odds of a decent retest go up quickly.
QQQ Daily Chart
Everyone is expecting a clean retest of prior all-time highs on SPY, which usually means it won’t be that straightforward. It’s very possible we push higher into the $730 area, maybe even stretch toward $740, without any meaningful pullback, and then roll over from there. If we follow something closer to the 1999 analog, that would imply a drawdown of roughly 9% from those highs, bringing price back down into the April 8th gap.
That kind of move would almost certainly spike fear and shift sentiment quickly. It would open the door to a wide range of bullish and bearish interpretations, but more importantly, it would reset positioning and create much better risk vs reward opportunities on both sides.
Both the 1999 and 1990 analogs point to a choppy May. From there, the paths diverge. The bearish version rolls over, while the bullish version consolidates further and then pushes higher into the back half of the year.
If we end up ranging within roughly plus or minus 3 percent this month, that keeps SPY contained between about $700 and $740 and keeping both of these analogs in play.
SPY Daily Chart
Right now, there are quite a few setups that look good for continuation higher, including names like LASR, RKLB, and CRUS. The issue is that most of these have earnings this week, and earnings are a binary event. They can completely invalidate an otherwise clean setup and lead to losses that are well beyond a typical 1R risk, which makes swing trading over earnings not ideal.
One name that doesn’t have earnings immediately is NVDA. Earnings are still about 16 days out, which is plenty of time for a swing trade to play out, especially in a market this volatile.
NVDA is a key name and one I cover weekly. It’s now pulled back into what I would consider a buy zone for short term swings. If it’s going to bounce and make another high in May, this is about where that move should start. Price has retraced into the 20 EMA and is testing it for the first time since the April rally began.
NVDA is at a critical spot here, and what it does next matters for the broader market. If it holds support and turns higher, it supports the idea that there’s still fuel left in this rally. If it starts breaking down and losing key levels along with longer term moving averages, then the recent breakout begins to look much more like a bull trap, which would have larger implications.
NVDA also has a history of trapping traders and delivering “gap and crap” moves around earnings. I am thinking we could see more of the same in the upcoming earnings. The current setup looks very similar to what we saw going into November 2025. Back then, earnings didn’t resolve the chop, and there’s a real chance we see something similar this time around.
I want to see some strength come in around this area and will enter a trade on the lower time frames with my stop below the daily candle. Monday’s wick was a start, pressing higher from here will confirm it. We have 4 bearish candles in a row, which tends to be the limit for NVDA before some kind of bounce. Maybe we push to a higher high, maybe we put in a lower high before earnings. But as long as key levels continue to hold, I’m looking for a bounce into earnings.
Ideally, that leads to one more push higher across semis before a larger rollover, which would line up well with the SOXX short thesis I previously laid out.
NVDA Daily Chart
Thanks Yates! Really enjoyed the update.