Bulls Flip The Script- FOr Now
The futures night crew on Wednesday did the heavy lifting that couldn’t be done in the cash session, allowing for a gap up above key GEX levels on Thursday. The day was mostly bullish, too, with SPX nearly retesting the large GEX cluster at 7550 and QQQ reaching just over 724. I notice SPX and QQQ didn’t make it to their previous highs this week, and I also have concerns about SMH acting dazed and confused during the cash session. The VIX is once again below 16 as well, a potential bottoming zone. For now, we remain in what we view as a limited upside scenario in a choppy range.
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QQQ: “Most Improved” Award Winner
QQQ appeared to really be on the ropes the last few days, making lower lows below the daily HMA and the weekly 9 SMA, with large overhead GEX clusters at 710 and 715 representing resistance. We saw a close around 711 yesterday, with Thursday’s gap up overtaking the 715 GEX cluster. We have conflicting signals, including negative cumulative net option flow at 730 and the upper Dealer Cluster zone at 730 as well, potentially indicating a less than 1% move before dealer activity might shift toward selling. The weekly HMA is turning lower just above 740, which is also a significant GEX cluster, so I view any move beyond 730 as likely meeting resistance near 740. Loss of 720 may target 700, in case you’re not tired of the same range we’ve seen for weeks.
Key Levels: Bullish above 720 targeting 730, then 740. Bearish below 720, targeting 715, then 700.
QQQ Has A Potential “Ceiling” At 715, Risk To 691
QQQ touched the large GEX area at 700 today, which is where we said we’d start to become interested in a dip buy. Lots of carnage below the surface has certainly put a lot of stocks in the discount bin, but the charts themselves are not looking very bullish, from my perspective. We also see another very large GEX cluster just overhead at 715, which could act to repel QQQ lower in opposite fashion to what we saw at 700. Overtaking 715 does begin to look more convincing that a move to 730-740 could happen shortly. We do see net negative GEX clusters down to 660, but 690-691 is the next area of interest on my chart given that the weekly 15 EMA sits at 691.40.
Key Levels: Bullish above 715 targeting 730-740, bearish below 710 targeting 700, then 690.
IWM: Impressive Bounce Into Resistance, Needs Over 299
Based on the long tail on yesterday’s candle and the successful holding of the 290 zone, it’s possible IWM put in a bottom. The counterargument includes a close below the HMA and 9 SMA, failure to overcome the downtrend line, and a GEX picture that still appears to show 300 as a potential ceiling (for now). IWM closing above 299 raises the odds that a low is “in,” in my view. 280-285 become possible below 290.
Key Levels: Bullish above 299 potentially targeting 305 initially, bearish below 290 targeting 285.
The VIX Declined Into The Daily HMA
The continuation lower today for the VIX brought the VIX to sub-16 levels, still closing slightly above the daily HMA. Downside for the VIX appears to be likely limited to the low 15s, while movement beyond 17 may target 20-22.
Key Levels: Bullish above 17 targeting 20. Bearish below 16 with limited downside to 15.
One last note on the VIX: The one-hour chart already appears to be at a spot where a turn higher for the VIX could happen at any moment, with the HMA rapidly approaching the lower Keltner channel and the %b indicator near zero. I don’t see evidence that a huge spike is around the corner, and it’s possible the VIX may trade in a range between 15-18 approaching OpEx next week and monthly VIX expiration the Wednesday after OpEx, but keep in mind the risk beyond 17 of the spike going even higher. We will watch action on Friday in context of what SPX is also telling us.
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