GEX Divergences And VIX Expiration: December 16 Stock Market Preview
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You can view today’s YouTube video here, where we discuss SPX, IWM, the VIX, MCD, and more, so check it out if you have a few minutes!
Monthly VIX options expire Wednesday morning premarket, with big net negative GEX clusters at the 16, 17, and 18 strikes in focus.
To introduce an extra dose of guesswork into the newsletter, I wouldn’t be surprised to see the VIX near the 18 strike by Wednesday morning, though there aren’t any immediate signs that we’re on the brink of another big spike to 25, maybe not even beyond 20, if we see a spike.
The technical picture is shaping up more positively for the VIX, with today’s open turning the 9-SMA into support, spike to just over 17 before fading somewhat.
Let’s get a slightly different perspective by looking at the weekly chart: The weekly chart doesn’t look quite as optimistic for volatility as the daily chart, though continuation higher for the VIX could turn the weekly chart higher with enough positive VIX days strung together.
The declining Hull and 9 SMA indicate resistance between 17.87-18.49, right in line with the GEX clusters we view as potential targets heading into Wednesday.
IWM saw a lot of daily volume at lower strikes today, ranging from the 200 strike up to the 240 strike.
Technically, IWM still holds the approximate area of the daily 9 SMA and the big GEX cluster we see at the 250 strike.
IWM’s weekly chart still shows important support between 246-248, so IWM can decline further and still maintain potential for a rally to new highs for the year as we approach the timing of the potential “Santa Clause” rally.
SPX lost the weekly Hull today, but the next line of support on the weekly chart is the 9 SMA at 6785. The weekly 9 SMA has only seen one week with a solid close below the line since April, so recent experience favors a potentially brief drop below the line, if one occurs.
The large GEX cluster at 7000 remains, with significant GEX at 6900 as well.
Importantly, a divergence has emerged with SPX showing a positive change in net GEX at today’s close, back into positive territory despite the red candle today.
Could this signal yet another buy-the-dip opportunity during this period of weakness? We believe there’s a good possibility that this is so, and given that it’s OpEx week, a whipsaw move or volatility in both directions won’t be surprising.
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