Possible Catalysts For Volatility Ahead
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Today’s YouTube video takes an in-depth look at SPX as well as SPY, and we go over some individual tickers and concepts surrounding hedging, so check it out if you have a few minutes. You can view by clicking here.
We have a few potential catalysts for a trend change and/or a big move this week, which might match up with some upside targets that we’re watching, so let’s take a look at what’s on the calendar and what the GEX picture looks like.
SPX and QQQ both continue to show positive movement, even if it’s boring, with fairly narrow daily candles today while maintaining the trend above the Hull moving average. The Keltner channels are reflecting higher levels and a solid uptrend. I won’t entertain the idea of a larger downward move until we break the Hull and close at or below 5973, though that day may be near. I do want to bring attention to the fact that SPX followed the Hull to the point of reaching the upper Keltner channel toward mid-May, and the daily close below seemingly ignited a drop down to the 5800 area (fairly modest, really), and this time around we have a solid uptrend but no tag of the upper Keltner. With positive GEX and holding above the Hull, I assign high odds of reaching that upper Keltner, also close to matching with the largest GEX cluster we see at 6100. anywhere from 6050-6100 is fair game in my opinion for a short-term top.
SPX GEX did decrease today, though a reflection above 1B is a very positive reading in our view. The direction is worth watching though, and decreasing positive GEX combined with divergent price increases could heighten the risk of a reversal.
You might notice the zero gamma level is reflected at 5900, below both upper and lower Dealer Cluster zones, I attribute this aberration to the presence of sizable positive GEX clusters below the current price. Perhaps I oversimplify, but the presence of those GEX clusters at 5904 and 6000 still implies significance to those levels. A large cluster at 5700 also warrants attention as a possible downside target, and we discuss this further in the YouTube video linked at the top and bottom of the newsletter.
We see a similar setup with QQQ: The upper Dealer Cluster zone is higher, at 540, and QQQ still hasn’t quite reached the upper Keltner channel like it did in mid-May. The breach of the Hull becomes my most important technical indicator in such cases, with expectation that we likely reach that upper Keltner, essentially already at the 540 level. The confluence of the upper Keltner and the upper Dealer Cluster zone, combined with several potential volatility events ahead, leads me to believe an important pivot is just ahead.
QQQ also saw a noticeable drop in positive GEX as of today’s closing values. Considering recent closes and shifts in total net GEX, I don’t draw any conclusions from today’s decrease except that the trend will be important in assessing our next move, if we see an actual trend of consecutive GEX increases or decreases.
Wednesday might be when the fun starts, and it’s hard to imagine the market moving too dramatically before such large catalysts as CPI and PPI, or the 30-year bond auction. Given that CPI is a premarket announcement Wednesday, participants will be left either trading futures and/or positioning tomorrow (Tuesday) for the cash session open on Wednesday. We’ll be watching for any early indications of whether risk/reward is skewed more in one direction than another, but for now, our previously stated ranges and targets appear to be live and ripe for fulfillment.
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