Tagging The Upper Dealer Cluster
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We recorded today’s YouTube video just as NVDA was reporting earnings, so we were able to include a brief look at the NVDA GEX picture as well as where the indices stood at the close today. We also discuss MDLZ and some additional setups, so check it out! You can view by clicking here.
While it’s fairly typical to see this market move in a big way after hours, typical doesn’t equal easy, so we are left with a potential scenario entering tomorrow where existing long biased trades will potentially look great (if NVDA and futures hold their gains) while shorts and those desiring to enter long may face a more difficult set of decisions. As for us, we will manage profitable positions while adjusting the portfolio according to new information presented to us by the total and 0 DTE GEX pictures for the market.
As for SPX, today’s action saw a near-perfect morning rejection of the Hull moving average, which I don’t find to be a surprise. One bullish comment I made in our livestream this morning as well as YouTube is that the declining Hull is creating space overhead where a move higher could be more easily justified, in my view. This is important because the Keltners have typically been a fairly good boundary for up or down moves, so if the Hull is right up against the upper Keltner, we often see price crossing back under, like we did in mid-May. We’ll clearly see SPX above the Hull if overnight gains hold, and we may even open up very close or within the upper Dealer Cluster zone at 6000, a long-awaited target we’ve been watching for weeks. Given that the upper Keltner needs more time to climb toward those higher GEX strikes, my expectation is that any further incursion into the red box will likely meet resistance for now.
Furthermore, SPX actually saw a modest reduction in GEX today, though still in positive territory. We do see GEX growing at higher strikes, which is a positive sign, but the obvious difficulty in trading a bullish picture is navigating the bumps along the way, and tomorrow’s plausible spike higher could easily put us into a reversal zone.
QQQ has finally reached the 525 GEX cluster, which is also the upper Dealer Cluster zone, painting a very similar picture to what we see with SPX. GEX has grown all the way up to 540, and the Keltners are pointing higher in bullish fashion, but the coincidence of the Keltner boundary at roughly 530 and the 525 and 530 GEX clusters raise the odds of a pullback, in my view.
Can QQQ and SPX overshoot these GEX zones? Sure, and we usually see one of two things happen: Either price reverses fairly quickly and returns to the “magnet” of the large GEX clusters below, or we see GEX shift in such a way that participants become willing to support those higher prices, even if we consolidate sideways for awhile. I’d personally prefer 525-532 and then a drop to fill the gap below 500, but the market didn’t ask and certainly doesn’t care what I want (I know, shocking).
Why 532? Well, the 3D graph does show a fairly meaningful GEX cluster at 532 expiring Friday, though really anywhere between 525 and that level is fair game and carries increased risk of reversal compared to where we’ve been.
Exciting times and opportunity lay ahead as we’re finally seeing the catalyzing of the move to the upper Dealer Cluster zones, so we’ll be on our toes to react to changes in the GEX environment with the noted technical resistance in mind. Thanks for reading and we hope you’ll join us in Discord where we will be discussing these changes.
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