Stubborn Negative GEX
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Upside momentum may continue further in the short run, as we have short indicator signals on volatility (both VIX and VVIX closed below the Hull moving average) and we have a combination of positive shifts in the negative total GEX across most indices, as well as positive momentum toward further upside, perhaps the middle Keltner channel for SPX around 5515.
It’s not all unicorn neighs and rainbows though, as you can see the Keltners are still pointing down mostly, and the Hull is still dropping. In fact, I don’t like that we are as far above the Hull as we are. It’s true that I lean toward the long side above the Hull, but over time we tend to revert to at least a closer proximity to the line. After the lengthy drop we saw, I’d expect a period of consolidation or back-and-forth before resuming a sustained climb, though this is certainly not a requirement, the market can do anything.
GEX slightly improved, though still over -400M negative.
One last observation on SPX- notice we still have the largest GEX clusters at lower strikes, and while it’s certainly positive that we don’t see large clusters at 4700 and 4800 anymore, 5000 and 5200 are large. Given the current GEX structure, I don’t think it’s unreasonable to reach 5479-5531 in the short term, and as long at 5200 remains, we have an initial risk of retesting that level (we came within 20 points of it Friday, so not quite there). Otherwise, a straight shot to 5479-5531 also runs that risk. We expect more clarity after tomorrow’s cash session open.
QQQ has a lot of similarities in terms of which indicators serve as overhead targets (roughly 460-465 QQQ), and the Keltners are also moderating but still in a downward slope, but the large GEX clusters at 390 and 420 are particularly concerning. We also see very little GEX above 465. Once again, I’m not pouring cold water on the idea of upside continuation, but we need to look ahead so we have a gameplan of where to reassess and potentially protect profits on longs.
By Friday’s close, QQQ arrived very close to the zero total GEX line, which actually marked a top during the March 24-25 timeframe. Will this time mark another pivot back down, or will we enter positive territory and maintain positive GEX?
IWM is also somewhat of a contradiction, with solid negative GEX, lagging price action relative to SPX and QQQ, and virtually no GEX above 195. Yet IWM is closest to the Hull and IWM has maintained above the Hull for 3 days, which is a positive short-term sign. Volume was highest on Friday at the 173 strike, interestingly. Perhaps an immediate tag of 195, then more downside? I won’t speculate, but I will reassess intraday tomorrow for an updated view of what appears to be the most likely pathway.
I mentioned 195, but really 190 is the large initial GEX cluster that will have to be overcome. Unless GEX shifts, there’s no reason to consider prices over 195-200 at the moment. IWM in the past has been a fairly good contrarian indicator, reaching its most negative point in terms of GEX and various technical indicators when it’s time to buy, but with consideration of SPX and QQQ also looking suspect, we’ll continue exercising caution until we see more evidence of a larger turn.
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