Wrapping Up Q2, Looking For A Breather
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An amazing rally unfolded since the April lows, and we are still seeing GEX signal higher prices as the year goes on. But within this larger view, we may see some volatility that would shake the tree and punish the complacent. We address tactical levels and some important points in today’s YouTube video, which you can watch by clicking here.
Without rehashing too much of what you can find in yesterday’s newsletter (you can view past issues by visiting www.geeksoffinance.com/newsletter, if you don’t already receive them in your inbox), let’s take a brief moment to review where we closed Friday, with respect to your time by not repeating too much of what we’ve already said.
Looking at SPY, we’re at the upper Keltner channel and within the lower part of the upper Dealer Cluster zone. This confluence increases the chances that we do see some sort of reversal, even if we see a temporary overshoot of the upper Keltner, but the correction may also be temporary, since we see GEX generally increasing up to 630, and the Keltner channels are rising as time passes. The steep bullish trend remains as long as price remains above the Hull, currently just below 606.
Let’s get a little more granular as we look at the 3D graph, showing individual GEX clusters expiring tomorrow at 615 and 620. If correct, SPY is currently implying that we have roughly 1% upside tomorrow from the 614.91 close on Friday, and SPX has a very large GEX cluster at 6200, further emphasizing the likelihood of another attempt toward 6200/620.
QQQ is at the doorstep of the 550 upper Dealer Cluster, also at the top of the upper Keltner channel. Huge option volume at 470 and 515 on Friday (despite not a lot of accompanying GEX) implies that some participants were hedging at the end of the week, though the chart itself does not look overly bearish (it looks constructive, actually).
IWM also saw a fairly decisive shift toward bullish territory, with 220 representing the upper Dealer Cluster zone, and GEX having been added at 230 and above. Friday saw huge volume at 220 and 230, and we see a big reversal in negative GEX, leaving IWM looking more positive overall. Given past experience, is this a contrarian bearish signal? I think it’s likely in the short run, though IWM’s lagging the other indices does create an upside opportunity (depending on other factors).
Lastly, the VIX was pressed even further down from 17 toward 16, seeing eager VIX short sellers pushing the VIX toward the lower Dealer Cluster zone, where we expect dealers might become buyers. The declining Hull presents 18.77 as a major support (now resistance) area to watch for future direciton.
Interesting times are ahead and we will do our best to flexibly update our views as the data shifts, and of course we’ll share those thoughts here and in Discord.
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