More Pain For SPX Bears? April 10 Stock Market Preview
Before we get into the market, I’ll mention tonight’s YouTube video, which features a discussion about SPX, the VIX, NFLX, TSLA, and NBIS. You can view the video as well as our library of previous videos by clicking Community at the top of our homepage to find our YouTube channel link. Check it out if you have a few extra minutes!
The VIX is getting stretched to the downside even further, technically closing below the important 20 level, and we see more GEX that we did yesterday at the 19 and 18 strikes. All positive signs for market bulls.
However, regardless of the ultimate resolution of this push lower on the VIX, risk exists for a VIX spike in the near term, even if such a spike results in a lower high and another reversal back to the 15-17 range we’ve seen since June 2024.
Notice the VIX is only barely below the weekly 50-day EMA at 19.59, a line I want to see more decisively broken if we’re to believe that bears are heading for hibernation.
We also saw big volume at the 50 and 60 strikes today. Overall, bulls have accomplished a lot this week, but too far and too fast carry their own risks.
IWM and other indices were able to reverse early attempts at lower prices and ended up closing higher than Wednesday’s close. IWM’s upper Dealer Cluster zone has shifted up to 270, matching the upper Keltner channel as positive GEX is now largest at 270, on a net basis.
We still have conflicting signals from volume, with heavy volume at 250 and 252, over 10 points lower. We may not see a push beyond 265 in the short run, but if we do, the degree to which we are stretched above the moving averages suggests to me that IWM is at high risk of a pullback immediately. thereafter, if not beforehand.
The pattern and what we see with GEX and volume still suggest to me that the 250 area (or slightly lower) likely represents a good spot to consider long positions.
After the huge move up, IWM poked into positive net GEX territory yesterday, only to see net GEX slightly decrease today. Technically a divergence, but not one that I consider to be very meaningful in my decision making.
I’ll touch on an observation I’ve made before: At least over the last 2.5 years or so, IWM reaching positive GEX territory sometimes marks highs instead of lows, or at least we’ve sometimes seen immediate pullbacks before pushing higher with such readings. This time may be different, but my caution toward believing the “coast is clear” remains.
QQQ’s upper Dealer Cluster remains between 610-620, and substantial GEX remains at the 580 strike below, somewhat negative factors in my view.
We see today’s volume (to the far right) at mostly lower prices as well.
QQQ’s action in the 610-615 zone may carry significant clues as to whether we will see further immediate upside or go for the gap fill below.
SPX has been the strongest racehorse today, barely seeing any negative action before ripping over 6800 to close at 6824.81.
SPX is still within the upper Dealer Cluster zone, which did shift somewhat, with 6800-6900 representing an area where dealers may inflict some selling pressure.
While the odds don’t likely favor a move straight to 7000, it’s certainly possible, bringing SPX to the declining upper daily Keltner channel and a spot where another pullback may occur. I would be shocked to see 7000 reached immediately. Entertainment factor would certainly be at a maximum.
SPX net GEX is heading for one of the highest closing prints we’ve seen this year, nearly reaching a GEX extreme when compared to all prior readings over the past year. Such a print is typically a sign of approaching the end of a rally, not the beginning of one, though the contrarian signal isn’t meant to predict tomorrow’s performance, per se. So we will take risk cautiously with the knowledge that too many of the boats crew may be on the same side of the boat, causing it to list (Leo DiCaprio can’t save you from that situation either).
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