Approaching A VIX Expiration Pivot?April 14 Stock Market Preview
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In yesterday’s newsletter, we noted our view that we are leaning bullish, with a deeper dip likely representing a solid buying opportunity, in short. Well, the dip didn’t get as “dippy” as I would have liked, with the relatively shallow drop getting bought as the bears endured yet another day of pain.
The VIX did reach roughly 21.5 in the premarket (not shown on the chart below), but got crushed to an incremental red close for the day. I will note that VIX and VVIX both made higher lows today compared to Friday.
The vol crush also brings the VIX back slightly under the weekly 50 EMA, the last line of “defense” on my weekly chart.
GEX has reached an extreme negative reading as we approach VIX expiration Wednesday morning at 9am ET, with the largest net negative GEX clusters at the 19 and 20 strikes.
I still believe odds favor a larger VIX recovery, though potentially from the 18 area if not from the current position near 19.
We don’t see much net GEX below 18 and option volume today was mostly between 19-25.
Can we see a pivot around the timing of expiration? Such a reversal wouldn’t be without precedent, but we also have OpEx Friday to contend with, so my expectations are that any VIX spike in the near-term may be short-lived, even if we see 25 reached.
IWM made a lower low today compared to Friday, yet a huge rally emerged from that low, sending IWM to the 265 strike, within the upper Dealer Cluster. Given the momentum, a move to 270 wouldn’t be surprising, even before we see a pullback. 270 is very close to the upper Keltner channel, so we have a number of metrics pointing to a possible inflection point soon, including the volume that we see at strikes mostly between 250-270, with very little above 270.
QQQ’s upper Dealer Cluster has shifted higher with recent momentum, now sitting between 620-627. Volume at 600 looks interesting, and the steeply rising HMA and 9 SMA have increasing odds of crossing over QQQ’s price if the momentum slows even a little, so I may soon have a short signal to consider.
I still anticipate any selloff toward 590 will represent an area where I’ll be interested in buying.
SPX is at the doorstep of the upper Dealer Cluster zone, stretching from 6900-7000.
Excluding GEX and volume associated with today’s expiry, we see a lot of attention to the 7000 strike, and GEX is still biased towards upside.
While GEX certainly suggests the rocketship may continue higher without interruption, reaching 7000 would be within a stone’s throw of the upper Keltner at 7023, so whether the Keltner channels or other moving averages are taken into consideration, a pullback is likely near, with the big gap below as a possible target.
April 17 OpEx GEX leans positive, with SPX showing the two largest net GEX clusters expiring the 17th at the 6900 and 7000 strikes. We could hit this area sooner, or if we see a pullback into mid-week VIX expiration, we may have an end-of-week move toward 6900-7000.
Bottom line is that the market looks bullish off of the lows, but we’re getting into stretched territory since Thursday. Momentum can take us higher, but for how long before a decent pullback? We might not have to wait too long to find out.
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