VIX Triggers A Long Volatility Signal?
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IWM was the first index to conquer both the upper Keltner channel and the upper Dealer Cluster zone, and then reversing fairly sharply intraday, once again appearing to lead the way for other indices. With the Keltner channels rising significantly and SPX as well as QQQ not quite hitting their recently evolved upper Dealer Clusters at 540 and 6100, does this mean we might see a challenging gauntlet to the next meaningful short term top? Until we breach the Hull moving average with a daily close, I’m betting that we still need to watch for upside risk, but let’s take a closer look.
Looking at the VIX above, we have very negative GEX, a really low GEX-weighted volatility gauge at a level of 1 (lowest volatility relative to the prior year), and the first close above the Hull moving average since 5/27. We did peek above the line on 6/5, but the next day saw a resumption of the downtrend, so a similar pattern is possible tomorrow. The difference this time is that 17 is quite a bit lower than the VIX level on the 27th, and we have virtually no GEX present below 16, so we might have seen a trend change for the VIX today. Volume remains elevated at higher strikes, as evidenced by the horizontal light blue bars.
Indices are giving conflicting signals, though it’s not unprecedented to see the VIX begin a climb while markets rally. SPX closed above the Hull after an intraday attempt to break below the line. We see confluence of the upper Keltner channel with the large GEX cluster at 6100, and an impressive growth in GEX at higher strikes over recent weeks, showing possible targets all the way up to 6500. I view the concentration of individual large GEX clusters on specific dates as well as the upper Keltner channel as a better guide for the timing of such moves. In other words, with the daily upper Keltner channel and the 3D GEX graph in agreement on the likely near-term limits, I don’t expect 6500 to be tagged tomorrow, but 6100-6200 is within the realm of more likely possibilities (and especially 6100).
SPX did see a meaningful 500M drop in positive GEX, but 896M is still a solid positive number, so we can’t pass too much judgement from the total net GEX number as GEX chops within a zone for now.
QQQ has far less meaningful GEX above 540-545, but 540 still appears to be a solid untapped target, also matching the upper Keltner channel. A loss of the Hull at 532 and a close below 532 would signal a solid possibility of a drop toward 520 or lower.
One aspect of the GEX picture I find interesting for Thursday’s expiration is the large negative GEX for QQQ at 526, roughly 1% lower. Does this imply 526 is a likely target tomorrow? With PPI and the 30-year bond auction, it’s entirely possible, and maybe even lower, though we’ll see what the 0 DTE picture tells us as we enter the cash session tomorrow morning.
IWM is still showing meaningful GEX at 220, though the 221 GEX mentioned in our livestream appears to have taken a backseat to 215, so perhaps IWM is almost done with this move. Similar to how I view QQQ and SPX, as long as we’re above the Hull, IWM is a tactical long, so keep that in mind.
IWM’s total net GEX picture has remained very weak, even as price as moved up. This could mean a number of things, but I don’t take te recent drop almost back to the zero line as a bullish signal. With VIX expiration Wednesday next week and OpEx the following Friday, we need to be on alert for a possible change, so we’ll be watching intraday developments as we approach the back half of this week. We hope you’ll join us!
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