A Test Of Resistance, Now A Test Of Support?
With the benefit of writing this newsletter as futures are showing noteworthy weakness, I think we can say we might not gap up on Tuesday. But one can never completely dismiss the potential for a whisper to create a bear panic. Joking aside, Monday saw SPX test the important 7550 resistance zone as QQQ reached 726, right within the 722-727 area we’ve highlighted for a few days. The VIX reached 15.56, very close to the 15.5 mentioned in the live stream Monday morning. SPX still maintains potential to reach 7600+ in the near term unless certain levels are lost that we’ll discuss below.
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SPX Can Make A New High As Long As A Backtest Of 7450 Holds
SPX has worked its way higher over the last 6 trading sessions, and we’re seeing the daily HMA and several other SMAs and EMAs turning higher. The GEX picture is positive and supportive of a move toward at least 7600, where GEX starts to diminish. We’ve discussed the weekly HMA as a potential upside target, currently at 7622. For the upside scenario to continue, SPX needs to stay above 7450 in my view, since dropping closer to the lower Dealer Cluster zone brings SPX below that thick cluster of moving averages. We generally view a visit to the lower zone as bullish, so why wouldn’t another visit to 7400 be bullish? Well, it may be, and that would be a tricky scenario given the divergence of GEX from the drop below technical levels. But the other possibility is that GEX may shift as price moves lower, shifting our expectations along with it. So stay tuned as we watch action around tomorrow morning’s lows, wherever they may be.
Key Levels: Bullish above 7550 targeting 7600-7622. Bearish below 7450 targeting 7400, then 7300.
QQQ TIghtening Its Weekly Picture Ahead Of The Next Big Move
QQQ closed below the 9 SMA Friday, but closed back above the line Monday. The rotation almost daily between the semiconductors and software (and now also Mag 7) is giving tech bros (and sisses) a headache. Which one wins? Are we witnessing a rotation that will leave AI feeling used and abused, or are big tech names like AAPL and META being teased with false hope of a rebound? We don’t have a crystal ball (now surrounded by Gorilla Glass), but we are aware of the risks on either side. One thing that becomes possible in a rotation event- as said in a previous newsletter- is outperformance by SPX as all of the beaten-up defensive names and big tech soften the blow of a deflating semiconductor sector. It might be too early to draw conclusions, but we’ll be watching price action and key resistance and support levels as QQQ prepares to break out of a narrowing weekly price range.
Key Levels: Bullish above 719 targeting 730, then 735. Bearish below 719, likely targeting 700, with shorter term pit stops at 715, 710.
IWM Is Starting To Look Like It’s Rolling Over
I’ve been championing IWM’s apparent resilience while SPX and QQQ dropped 3% or so into the lows in June, but I have to acknowledge that IWM being stuck below the HMA and the GEX level at 300 is starting to look a bit weak. The HMA is flattening out as price fails to capture the line as support, and we see negative cumulative net flow and big negative net GEX clusters between 280-290. We’ll want to see action around 290 for clues as to whether or not a reversal higher toward 310 can occur from that spot or if IWM has plans for a lower test first. It’s worth noting that IWM closed below both the 9 SMA and the HMA Friday for the first time in approximately a month, so a day or two of lower action this week would not be surprising, based on what happened the last time around.
Key Levels: Bullish above 300 targeting 310. Bearish below 296 targeting 290.
The VIX Is Likely To Test Daily Resistance Tuesday Morning
Don’t call me Nostradamus, but if futures stay weak, we may see the VIX test the declining HMA and 9 SMA between 16.75-17.30. I personally and subjectively think the VIX looks like it needs more time before being “ready” for a larger spike, so a rejection from the mid-17s back into the 15s would not be surprising. But ultimately, we’ll make decisions based on the picture at that time, so we’ll look at the VIX in relation to the indices and any updates to the GEX situation in our live stream Tuesday morning. We’ll also be posting in Discord, so hopefully you can join us in one of those or both locations to continue the discussion.
Key Levels: Bullish above 17.50 targeting 19-20. Bearish below 17.30 targeting 15.
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