The S&P 500 through $SPY: , Second Session: A Cleaner Read

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State Street SPDR S&P 500 ETF Trust just ran the obvious level, took the stops and reversed.

$SPY sits at $735.70, $43.70 below its 20-day high of $779.40 and $2.99 above its 20-day low of $732.71.

My read: bearish. The weight of the evidence points down.

What the sweep left behind

Against its own 60-session range, $SPY is 5.9% below the high of $781.62 (Oct 6) and 0.4% above the low of $732.71 (Nov 5). $SPY closed higher in 5 of its last 9 sessions.

Volume over the last five sessions averaged 1.6x the twenty sessions before them.

The largest one-day move in the past twenty sessions was -4.4% on Nov 5. Break of structure down through $750.36 on the daily chart. Liquidity sweep: price ran the highs at $774.03 and closed back inside the range.

What I make of it: stops sit at obvious levels, and a sweep shows they were collected. What price does next shows whether the move was a trap or a start.

What the market looks to be pricing in

Off-exchange trading: NORMAL: $92.5M block at $733.13, under half yesterday's biggest. Biggest single off-exchange print: 126,154 shares at $733.13, about $92.5M, on a downtick (seller hit). A print that size is one order being crossed away from the public book, not a crowd of small trades.

In options, dealers long gamma, call wall $780.00, put wall $730.00, gamma flip near $551.00, hedge pressure 1% of an average day's volume. Days to cover 2.5, 93.0M shares short, short interest -5.6% since the last report. Squeeze risk 4 of 100; shorts pressing 81 of 100.

Sentiment readings show bearish (-76 of 100).

Insiders: quiet.

What I make of it: the pieces mostly point the same way as the price, which is more than I can say for most setups. None of them is proof.

The bull case

• Charts can be annotated after the fact

The bear case

• Structure setup with a measured path to $662.13

The part nobody is talking about

What I think traders are overlooking is how close the call wall sits to my target. The strike where the calls are stacked can pull price toward it or pin it there, and that makes it a level to watch, not a prediction.

The price alone doesn't show it.

If I'm right, and what proves me wrong

If $SPY prints a retest of the supply block $762.64 to $775.64 that holds and volume expands, I think $662.13 becomes the next serious test. Above $781.77, I'm wrong.

The honest objection is selection bias. Sweeps that worked get remembered and the ones that failed don't, so any chart can be annotated into a story afterward.

That's the whole trade: a level to clear, a line that proves me wrong, and not much in between.

Kill switch

Any one of these and the thesis is over, no averaging down, no renaming it.

• A close through $781.77.
• Buying absorbs the selling at a key level and price reclaims it on volume.
• Order flow reverses: the sweeps and blocks turn to the other side.
• A scheduled event changes the picture before the trigger is reached.

What I'm watching

I think the weight of the evidence points down, and the line that proves me wrong is near enough to trade against.

Desk record. 32 of 180 scenario targets traded before their invalidation (18%), 97 stopped out, 51 ran out of time, average outcome +0.16% per piece. Past pieces say nothing about this one.

The desk's scenario leans bearish. Bull or bear, the kill switch above is what keeps either view honest.

Sources and further reading: SEC EDGAR filings for SPY · FINRA daily short sale volume files · Nasdaq short interest: SPY · Cboe options quotes: SPY · SPY quote, chart and data on StockMarketLoop.

Data as of Nov 6, 4:04 PM ET: options positioning, FINRA short volume, the off-exchange trade record, the structure map, SEC filings and the ticker's headlines. Vaughn McNair (Grandmaster-Obi) and Making Easy Money may hold or trade positions in the names discussed. This is speculation and education, not financial advice.