VIX Divergences: Approaching A Top? May 7 Stock Market Preview
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Indices headed higher yet again today, though we also saw more strength from the VIX, and we’ll discuss the VIX more toward the end of the newsletter.
QQQ is edging closer to the top weekly Keltner channel, which we mentioned yesterday as a “super stretch” upside target, 707 at the time. the top Keltner is currently near 713, so I think the “zone (also captured by the GEX upper Dealer Cluster zone)” could be anywhere from 700-715, maybe 1-2% higher from here before a reversal.
SPX’s daily chart with gross GEX clusters visible shows the continued significance of 7000. We still see elevated volume there as well, and SPX is at the doorstep of the upper Dealer Cluster zone.
A modest 5% pullback would take us to 7000, which sounds “healthy” after rigorous bullish exertion that took us up roughly a thousand (!) points without stopping.
GEX expiring Friday still points to a modestly higher 7400 target as a possibility, maybe accompanying a final push by QQQ, assuming the word “stretch” even carries meaning in this one-directional market.
The VIX is still hanging out in the 17s, and we haven’t made a new low since last Friday. GEX also refuses to budge from the 16-18 area.
The VIX closed a penny below the HMA, not really giving a clear signal as to what comes next, but let’s zoom in to the 2-hour chart next.
The 2-hour chart shows the VIX finally making an effort to turn higher, with the Keltners shifting direction and the VIX holding above the now rising HMA.
This shift in trend could continue alongside a rising market for some time, so this is not an “all-in short” signal in my view, but it might be telling me that a turn lower for the market is approaching.
A VIX spike initially may stop at 19-20, and the decision from that point will likely give us a flavor of how benign or bad the next pullback will be.
0 DTE GEX has been giving us some clear signals, and we shared some of this data freely in our general-chat today in Discord.
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