SPX Seasonal Weakness A Tailwind?
I see posts all over X touting the completion of the weakest seasonal week historically, so the odds improve of a more favorable market looking ahead. We’re open to this possibility, but let’s look at the data in front of us, which at least suggests the possibility that more tumult may be ahead: SPX and QQQ both closed below the weekly 9 SMA after closing above it the prior week for the first time since early February. The last time this happened, we began a drop that culminated with an approximate -10% drop. The time before that was in November, which was a nothingburger. So flip a coin on that data point (given the limited anecdotal instances I provided), but GEX itself has not meaningfully improved, still sitting in negative territory. IWM has been a bright spot, at least. GEX suggests potential strength Monday, but the largest net GEX clusters expiring Tuesday are all at lower strikes.
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SPX: 7200 And 7300 Still In Focus On A Net Basis
I narrowed down the net GEX shown on the chart below to include just the GEX associated with next week’s expirations. While our YouTube video makes some good points about the gross GEX picture and a supportive view of higher prices, the net GEX picture suggests the strength may be backloaded this week, with Thursday being the last trading day due to the 4th of July holiday. The weekly 15 EMA at 7243 sits right between the big GEX clusters at 7200 and 7300, making this zone a potential area of interest for a bounce this week. One reason I’m looking at a rebound from that area is because the negative GEX we see at 7200 and 7300 mostly expires Tuesday. Can we see GEX shift lower on later expirations this week? Sure, and we’ll be watching for any necessary adjustments to our view, but for now, the negative GEX is heavily weighted toward Tuesday, with potential higher targets looking out to Thursday. Rallies to 7420 may be rejected until then.
Key Levels- bullish over 7400 targeting 7420 and then 7450 initially. Bearish below 7400 targeting 7320 and then 7200-7240 below 7300.
SPX Net GEX: A Bit Limp Despite The “Bearish Stats Are Over” Crowd
SPX net GEX as of the daily close has really stayed quite flat since the drop into negative territory 4 trading sessions ago, which isn’t very encouraging. Ideally, we will see movement back toward positive GEX as SPX begins a move beyond highlighted resistance overhead. Such an improvement in GEX may be more lagging, but ideally, we would see improvement ahead of time, and we have some historical instances to point to where the improvement was a day or two ahead of the shift.
As described earlier, SPX net GEX is quite negative looking at Tuesday’s end of month and end of quarter expiry. It’s possible we will see a lot change with the GEX picture beyond Tuesday as participants make adjustments with the 3rd quarter in mind, so we’ll have some updates that we feel are important as the week progresses. Positive GEX clusters of note range from 7400-7500 mostly at this point, many of which expire July 1 or July 2 as opposed to earlier in the week, and the 2nd is the latest date that I chose in order to isolate next week’s GEX.
QQQ still shows 700 as a big GEX area, with negative GEX stretching down to 650 in meaningful comparative quantities, and positive GEX really diminishing beyond the 740 strike. The 3D model reveals lower targets potentially down to 685 expiring Tuesday, which is almost exactly aligned with the weekly 15 EMA at 685.11. I view this as a potential pivot area, if we are to see strength in the back-half of the week.
Key Levels: Bullish above 714 targeting 720-728. Bearish below 700 targeting 685.
IWM: Not A Care In The World, DOes It Imply A Snapback Rally?
IWM has really ignored the weakness seen in other indices, tagging 300 and leaving open the possibility of a move to 310. The close below the HMA is somewhat concerning, potentially implying a drop to the 290 area, though holding 290 keeps bullish pathways alive for the rest of the week. Given the picture painted by SPX and QQQ, one potential pathway may involve a drop to 290, then a move to 310 by Thursday, and we’ll only change our view of higher prices ahead if IWM decisively loses 290 on a daily close, which may bring IWM to 280 or lower.
Key Levels: Bullish above 290, targeting 310. Bearish below 290, targeting 280.
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