CPI And VIX Expiration: What Could Go Wrong? And For Whom?
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We posted a YouTube video today (as we do most days), which you can watch by clicking here. We take a slightly different look at the indices tactically as well as a few individual tickers including AAPL an HAL, amongst others.
Bulls haven’t met a gap down they didn’t like to buy since April, and today was no exception, with a rebound following the opening gap down across the board. IWM showed early strength, followed by QQQ. The VIX is still a bit more perky than bulls would like to see, but bulls also need to recognize they’re likely hard-pressed to get the VIX to sustain below 16 without a larger volatility regime shift. As we approach VIX monthly option expiration Wednesday at 9AM ET, things may get interesting, given the large negative GEX currently showing for the VIX. A brief overview of economic events this week reveals plenty of excuses for volatility, though OpEx week is typically a tough one for the bears to conquer. Nonetheless, some intraweek volatility may catch both sides offsides at some point.
CPI tomorrow premarket and PPI Wednesday are the first big reports we’ll see, with each accompanying an initial move in markets that the cash session participants will just have to watch while biting their already mangled nails (except for my friends broker Mugatu, he always has immaculate manicured nails).
On the one hand, we’ve been on “Pullback Watch” for the better part of a week as SPX and QQQ closed below their daily Hull Moving Averages, but on the other hand, the powerful trend higher has created some room between the Hull and the current price while the Keltner channels continue to climb, so SPX (as the first example) shows room up to the GEX cluster at 6300 just to retest the Hull from below. This move would place SPX above the upper Keltner channel, which would continue to validate my expectation of a larger pullback, but this pattern in theory could go on indefinitely. GEX at 6500 has grown and participants are still overall quite bullish in terms of option market positioning.
We see a very similar story for QQQ. In both cases, let’s take note that we are talking about a move higher of less than 1%, though given recent achievements of new highs and accompanying sentiment, this will likely feel like a huge achievement and appear to be a continued breakout from the perspective of buyers (those who aren’t swayed by pesky lines like the Keltners or the Hull).
I did want to highlight DIA, which appears to at least have greater room overhead to reach the Hull, currently just over 449, roughly 1% higher. Any push higher by the markets may see DIA outperforming other indices, and we did highlight a weekly opportunity with AAPL in the YouTube video linked above, which would presumably help DIA. Looking lower, which is still ultimately where I believe upside moves will resolve from this general vicinity (give or take 1%), we see elevated volume at DIA 415 and 420, about 6% lower. This would be a great buying opportunity for an early Fall high if we could get it, but in the meantime, we’ll continue taking it one day at a time.
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We posted a YouTube video today, as mentioned at the beginning of the newsletter, and we have many other short videos, so give our channel a look if you’re curious about recent market commentary and ideas as well as gamma (GEX) concepts explained.
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