Mixed Signals Abound
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Indices retested the Hull moving average today on the daily chart, which is exactly what I wanted to see. The initial test was rejected by SPY, SPX, and QQQ, but IWM and DIA actually closed above their respective hulls by mere pennies. We have a mixed picture at this juncture, and my guess is that the next decisive move will be in the overnight session, just because that will trap either longs or shorts and provide some fuel for the next move once the cash session opens, in theory (hopefully I’ve jinxed it, and we’ll open unchanged). To further complicate the picture, indices are still holding the 9-day sma just fine, so price is sandwiched between the 9-day and the Hull for QQQ and SPY.
Let’s take a look at the VIX first tonight as we see what else we can discern from volatility, if anything:
The VIX is still above the Hull, and today’s low retested the line within pennies. lower timeframes such as the 4-hour chart show the VIX below the Hull and potentially aiming for VIX 20, but the 2-hour has regained the Hull as support, so the next move is not completely clear. Notice the light blue bar on the chart above? That’s a huge 324k contracts traded at VIX 35. Regardless of whether or not we visit 20 first, I am on watch for a risk off move for markets and the VIX to spike to somewhere between 30-42.5.
SPX (below) closed below the Hull after peeking above the line, yet we still have big GEX clusters at 5800 and at 6000 that warrant attention. And despite the daily candle, we saw GEX increase, a positive sign. Could today’s close below the Hull be exactly what it looks like- another nail in the coffin of this move higher- or is it a trap? I think it’s entirely possible we gap above the Hull tomorrow, but at this time, I have a hard time believing the upside will be more than 2% to the 5800 mark before indices find an excuse to drop into OpEx Friday. There’s a lot of call premium to kill at this point, right?
DIA closed above the Hull (barely), though DIA is also now in the upper Dealer Cluster zone, where we see dealers potentially becoming sellers, in theory. Volume was big today at 425 and 427, and we have sizable GEX at 423 and 425, so we may see a move just beyond the current area, if SPX makes a move for 5800.
DIA saw net total GEX rise today, poking just above the zero line again. This is still a positive development despite the last attempt failing, though there’s no guarantee it won’t fail this time, either.
Lastly, QQQ looks a lot like SPX, though the upper targets at 490 and 500 are far more suggestive that SPX isn’t likely to make it past 5800 anytime soon. Furthermore, the upper Keltner channel isn’t far away either.
QQQ’s largest GEX clusters for OpEx Friday are at 490 and 500, and we’re so close to those levels already, I have a hard time believing we won’t see a larger move between now and then. For instance, if we make it to 500 tomorrow, there’s a good chance we’ll see the GEX picture shift one way or another. If we drop starting now and head lower for a couple of days, perhaps they remain targets for next Friday. We’ll just have to see what happens in the morning.
To summarize, we looked above the daily Hull across the board, and whether the close was just below the Hull or right at the Hull, we’re left with a picture of indecision, perhaps slightly leaning toward the negative in terms of the chart indicators. Including GEX, we have a more positive picture, and the potential to overcome the Hull to make a Friday or Monday high, and then perhaps we can see a “real” pullback into OpEx Friday before beginning the march toward SPX 6000. We are hedged, so we’re comfortable reacting to the first move and taking advantage of the accompanying opportunities.
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