SPX GEX Extremes, QQQ Chart Resistance: May 15 Stock Market Preview
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SPX maintains its incredible uptrend, maintaining the most extreme positive upside bias above the upper Keltner channel and above the daily HMA.
We want to bring attention to a shift recently in the GEX picture: The 7400 strike now represents a significant positive net GEX cluster, potentially representing a near-term downside target from today’s close cutely above 7500.
Most of today’s volume was below 7500, and we don’t see a lot of meaningful GEX above 7500, so the 7400 area appears to be an important pivot that may indicate additional downside or a move toward the 7600-7700 area.
Given the lack of GEX above 7600, any intention to move higher from 7400 would likely include a shift in the GEX picture, unless we’re looking at a brief intraday high that reverses by the close.
We’re clearly in uncharted territory to the upside, so my initial approach to any move in either direction is one of caution.
SPX’s GEX intensity Gauge is one reason for caution, given the relatively uncommon achievement of a close in extreme positive GEX territory, a potential contrarian signal that we’re near a short-term top.
To add to the sentiment of caution, the GEX-weighted Volatility Gauge is higher than 56.2% of the time over the last 52 weeks. Why would options be pricing in greater expectations of future volatility while the VIX is testing 17 (which has only been touched 3x since February) and the market appears to be in a never-ending rally? Super bullish, or bearish?
QQQ has reached the upper Keltner channel on the weekly chart, a relatively rare feat over its history.
The current weekly Keltner upper channel reading of 724.73 has GEX backing as well (GEX at 725 is significant tomorrow), so we might see a higher high tomorrow for QQQ.
The volume at 700 was unusual today, and we also see significant GEX at 700. I don’t know whether or not we hold a move to 725 tomorrow, but overall, I view the odds as favorable of a tag of 725 and a tag of 700 consecutively between Friday and Monday. Let’s see if GEX+charts proves to be correct in this case.
Ultimately, QQQ is likely to retest lower levels, in my opinion, but we’ll take it one level at a time.
Here’s a quick look at the 3D graph: Friday’s largest net positive cluster is at 720, and 725 is right behind.
IWM has been sitting out of the rally (as has RSP, the S&P equal-weight index), and we see volume heavily at lower strikes, especially at 270.
IWM is also “stuck” below the HMA at 285,70, but considering the candle tails and closes near the line, I’m inclined to believe that IWM at least tests levels above 286 below seeing the move to 270. 290 would be the logical upside target, so let’s see what happens.
The VIX continues floundering around the key moving averages in the 17-18 range, which is actually divergent given the big positive moves by QQQ and SPX.
Looking at the VIX low, however, any drop in the VIX that holds above 16.44 on a daily close is (in my opinion) a contrarian bullish signal for volatility. It’s also obvious that participants trading the VIX have little interest in strikes below 18, based on daily volume (in light blue to the right of the chart).
Thanks for reading, we’ll see how tomorrow unfolds at the open and we hope you’ll join us in Discord to continue the discussion!
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