Signs of Cracks In The Nasdaq?
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We posted a YouTube video today, which you can watch by clicking here. We always cover a few individual names not discussed in the newsletter, and sometimes additional observations on the indices, so be sure to check it out.
Let’s start with a quick look at the VIX before we jump into QQQ and SPX. After Monday’s VIX spike, markets have rallied ever since in choppy fashion. Today was the first time since Monday that we see the VIX closing above the Hull Moving Average on the 4-hour chart, also printing a doji candle. This is suggestive of a possible VIX move back over 16 at a minimum, consistent with the big GEX cluster we see at 16, but I will also note that the lower Keltner is closer to 15, so watch out for an “unexpected” attempt to move higher on a Friday following a strong rebound from Monday’s low (I know, futures are currently lower). Also keep in mind, next Wednesday is when monthly VIX options expire premarket, so we could still see a reversal early next week to assist in creating some pain for VIX put holders as we approach Wednesday.
QQQ and SPX have been flip-flopping, with SPX making a lower high yesterday as QQQ made a higher high, then today SPX made an incremental higher high while QQQ floundered. In the meantime, these “records” are all technicalities within a few pennies as red paint becomes more visible under the hood (don’t look at the software sector today, or everything but the Magnificent Seven yesterday). Weakness is present under the surface. QQQ’s GEX structure shows diminishing GEX clusters beyond 560, and we are still below the daily Hull. A break below the weekly Hull at 553 carries potential to see a more meaningful drop of 3-5% or slightly more.
QQQ GEX also decreased today, chopping around in neutral territory despite the outlier positive spikes. While certainly not bearish, and QQQ does have a good shot at higher highs before the year is over (based on GEX), we shouldn’t be surprised by a little more downside after such a strong upside move right into overhead resistance. A tag of 560 should see a stronger reaction, in my opinion.
SPX is at the doorstep to the 6300 upper Dealer Cluster zone, following the upper Keltner channel higher while remaining below the Hull. It’s amazing that each week has been about 100 points for SPX. Trading is easy, right?
SPX still shows most of the GEX above 6300 to be focused on the Aug/Sept timeframe, and we are clearly in a positive GEX environment, but I want to point out a standout negative cluster we now see at 6050 for OpEx Friday, the 18th. I find the level interesting because it may end up representing the lower Keltner channel as the Keltners rise with the uptrend, and the lower channel would be a natural spot for a bounce, not that we’re guaranteed to always span the entire channel with the ups and downs of the market. But I ask you to look back on other corrections during steep uptrends. They are sometimes very sharp (the entire move in 1-3 days), then we resume the climb higher. The 2022 grinding downtrends for extended periods of time are far more difficult to trade, in my view. So let’s hope that whatever the next “real” pullback looks like, it concludes in fairly short order with a nice buying opportunity for the next leg higher.
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