Larger Reversal Or Dead Cat? February 18 Stock Market Preview
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Tonights YouTube video takes a look at SPX, the VIX, IWM, and NFLX as we approach OpEx, so check it out by clicking Community at the top of our homepage to find the link to our YouTube channel!
Let’s start out by looking at the VIX, with monthly VIX options expiring in the morning at 9 AM ET.
We saw GEX shift downward today as participants moved away from the positive GEX strike at 25. The current largest negative cluster expiring in the morning is at 19, and the largest positive is at 20, which is no surprise given the close today just over 20.
The beginning of the new option cycle for the VIX tomorrow could see further shifts by participants, but for now, we will watch technical support levels for signs of continued momentum higher for the VIX, or a shift lower, particularly if the VIX loses the 17 strike, the weekly HMA.
QQQ closed just above the key 600 GEX cluster, testing the November lows as the next move is decided upon. QQQ reached 593 intraday, getting close to the 580-590 area discussed as a potential downside target area in the event that selling continues.
The Keltners are aiming lower and the moving averages are also in a downtrend on the daily timeframe, so the burden is on the bulls to more decisively stay above 600 and pull the averages higher by showing strength. Until then, we need to be open to the possibility that this bounce is more of an OpEx reprise than a meaningful change in trend.
GEX actually moved more negatively at the close as well, not something we would prefer to see if a strong move higher was imminent.
SPX closed just shy of 5 points over the 15 EMA on the weekly chart, failing to recapture key resistance on the daily chart (so far).
SPX tagged the lower Dealer Cluster zone today, also testing the middle Keltner channel with the intraday low of 6776.
Continuation lower brings 6700 and then 6600 into focus, which also matches with the lower daily Keltner channel.
SPX also saw net GEX move slightly more negative into the close, similar to QQQ. Not an inspiring change in the face of a positive move in price.
To end on a positive note, SPX currently shows 6800 to be the largest net negative GEX cluster expiring Friday, with 7000 showing as the largest positive cluster.
We know GEX can shift quickly, and thus our estimation of the odds to hit certain targets, but the current setup suggests a potential range between the two clusters, and potentially limited downside (for now) given the large GEX cluster at 6800. This may change tomorrow, and certainly we can see a larger move after OpEx, but for now, we will watch daily closes at or above 6800 as a sign that the range is intact for the next two days.
6900 is likely to be a big test, if SPX can continue higher toward that level, with 7000 as the target above. Any move below 6800 risks a larger shift in SPX’s GEX picture into Friday, so we’ll be monitoring the GEX picture immediately after monthly VIX options expire in the morning.
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