VIX Holding Support, IWM Looks Bullish? February 27 Stock Market Preview
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Today went largely as anticipated when considering the points made in last night’s newsletter: The bullish rebound in SPX and QQQ appeared to be a bit stretched, and sure enough, we got the drop today, testing the levels mentioned as key support and holding those levels (for now).
We also saw the VIX finally test the HMA and 9 SMA on the weekly chart, just below the daily 50 EMA.
Given the importance of this area in maintaining an uptrend for the VIX, it’s not surprising that we saw a very strong reaction, sending the VIX to just over 20.
The failure over 20 is interesting though, especially given the lower high that we’ve seen this week for the VIX. Are we seeing the early signs of a reversal to a breaking of the uptrend for the VIX, with accompanying lower VIX levels? The intraday volatility may be reflecting the recognition by participants of time being up to decide which way the market is going to go.
Note the very high VIX volume at the 35 strike, with a lot of that volume concentrated on the March 18 expiration.
IWM started out showing relative weakness, leading the other indices lower, but then a powerful reversal occurred, with IWM closing near the highs of the day. Other indices followed, or at least reversed notably off of lows.
Today’s close also marked the 2nd day that IWM closed above the 15 EMA, the HMA, and the 9 SMA.
The long tail and closing above key support on the daily chart looks bullish to me, and the upper Dealer Cluster zone and large positive GEX cluster at 270 is certainly a possible target if we see continuation higher. Does the VIX suggest that such a bounce in markets would be short-lived? This is the question that I have, and I’ll be watching for additional clues in coming days.
SPX reached a low of 6861 intraday, testing the confluence of the HMA, 15 EMA, and 9 SMA before bouncing, leaving a long tail, despite closing with a red candle. Overall, my opinion is that the action is positive, and we’ve seen accompanying improvement in the net GEX reading for SPX as well. Continuation higher targets the 7000 strike and the upper Dealer Cluster zone.
QQQ saw a similar move- a decline that tested the HMA, 15 EMA, and the 9 SMA, with the biggest difference being that QQQ closed below the 15 EMA. The relatively less bullish close is not a surprise given QQQ’s performance since October, but I still give more credence to holding above the HMA and 9 SMA, combined with the improvement in the GEX picture and those moving averages turning higher.
620-630 are possible upside targets once 610 is regained, with the usual suspects below, from 580-600 if we lose 605.
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