SPX In Rare Territory: April 9 Stock Market Preview
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At first glance, the drop in the VIX looks bullish. We see the weekly candle rejecting at the HMA for the 2nd week in a row (so far). GEX has flipped negative, and the VIX closed at the lowest level in 5 weeks.
Without guessing whether or not the VIX ultimately resolves toward 15 again or rebounds to resume the uptrend over a longer period of time, I have some immediate concerns:
The trendline going back to December is largely intact.
The VIX is very far below the HMA. Will this time be more like May 2025 or will we see mean reversion toward 25-28?
At this moment, we see very little GEX below 20, and virtually all of the volume was between VIX 18-40, with some outlier volume at higher strikes. Risk/reward based on option activity seems to be tilted toward a possible rebound for the VIX from these levels.
IWM is in the upper Dealer Cluster zone, where we expect dealers may apply selling pressure, and we still see most volume at lower strikes (excluding 0 DTE volume).
While the large gap and option activity both signal caution in my view, we do see a lot of GEX betwen 240-250, and the first touch of the thick cluster of moving averages around 250 might be a spot where I’ll consider a new long entry.
QQQ saw selling after the open, similar to SPX and IWM, though not much ground was given back following the big gap up.
Similar to IWM, we see QQQ in the upper Dealer Cluster zone, with a lot of room between the HMA and the current price, and volume was mostly focused on lower strikes when we exclude 0 DTE volume and GEX, as we did on the chart below.
Negative GEX at 588 expiring April 17 is the largest net GEX cluster at a single expiration currently.
SPX did behave a bit differently relative to IWM and QQQ: SPX closed near highs of the day, and excluding 0 DTE GEX and volume, we see 6800 and 7000 receiving the greatest amount of attention from the options market, though 6750 is the 2nd largest net GEX cluster.
With the HMA rising sharply now, any mean reversion that may occur might not make it to the current HMA value at 6548, and I want to see what might happen at 6700 first, given the large net GEX cluster at that strike.
@alpha_pls on x.com posted that today’s gap up over both the 50 day and 200 day moving averages is fairly unusual, occurring only 4 times since 1950. Each of those instances saw significant selling afterward. Will this time be the same, or different?
The largest net GEX cluster expiring tomorrow for SPX is at 6750, though we see 6730 and 6800 fairly close behind.
While the gap up today may be overdone in the short term, we are more constructive toward buying dips than we were several days ago, and we’ll be watching for more clues as provided by the GEX picture and price action around key indicators.
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