The VIX: Not Done Yet? March 6 Stock Market Preview
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SPX price action is suggesting that the downside might not be over, in my opinion. We continue seeing a neutral (leaning negative) GEX structure, and repeated rejection of key overhead technical resistance on both daily and weekly timeframes. Even the “big” positive days (any of the last 3, actually, if we count the cash session open/close) haven’t been able to overcome the HMA or 9 SMA.
As for the weekly chart (shown below), Absolute net GEX (in purple) as well as option activity is elevated at 7000 strike, which represents an interesting upside target, but we see more GEX between 6500-6700 than we do between 7000 and 7400.
I know, I see the elevated volume and GEX at 6000, but wake me up when we lose 6600, as far as that’s concerned.
Zooming in to the daily chart, and excluding GEX/volume that applied strictly to Thursday, we see once again that 7000 received a lot of attention. Volume (in light blue) was elevated, and we’ve known about the large net GEX cluster at 7000 for some time. Most of the GEX at 7000 is concentrated at March 20. Could we see a Friday low this week, then a move to 7000? Well, next Friday’s largest net GEX is at 6900, so I will leave the difficult math up to you, the loyal (and talented) reader.
The issue remains that SPX continues respecting the downward trend of a variety of moving averages: the 15 EMA, 9 SMA, 50 EMA, and HMA. Not a good look in my view, and I don’t even have 20/20 vision. IF we reach 7000 by March 20, I will want to look closely at what else has changed by that time.
Looking lower, whether we’re dealing with a Friday low or not, 6600-6700 look like the highest odds initial tests that may see a reversal. 6700 because we see substantial GEX at that level, and we barely missed it Tuesday, or 6600, which is a large GEX cluster as well as being close to the lower daily Keltner channel.
QQQ went from the Biggest Loser to the strongest of the bunch, largely thanks to the software stocks.
Bulls should welcome this signal given the importance of tech during the entire bull market since 2008, though the usual disclaimer exists that we risk tech having a change in character this time (just to cover all bases).
QQQ’s chart seemingly flipped from a downtrend to sideways consolidation at the beginning of February, though GEX still reflects a bias toward lower strikes.
I prefer to give SPX more weight than the retail-influenced (emotional) QQQ, but it’s still worth noting.
For me, as long as 590 holds, I think we may end up seeing a move toward 630, otherwise, below 590 targets 570 and the lower Keltner channel.
The VIX continues to maintain the uptrend that began in late December, and now, we see higher lows being maintained at a steeper ascent, possibly backing the view that a short-term top is due for the VIX that coincides with an SPX low.
VIX 22 becomes an important marker on the downside as a possible pivot, though positive clusters up to 35 also saw some intraday volume.
Breaking 20 on the downside may suggest a complete shift in momentum, so we’ll be watching this closely tomorrow and Monday!
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