Reversal or Breakout? September 5 Stock Market Preview
Tonight’s YouTube video can be viewed by clicking here. We take a look at where indices closed as well as a few individual ticker setups, so check it out.
The VIX closed a little over 1% lower than the daily 9-period SMA and above the weekly Hull Moving Average at 14.68, leaving us in a zone of indecision for the VIX. Given the VIX support that has held all year, caution may be warranted for bulls in this zone, with a VIX spike or reversal possible anywhere between today’s close and the mid-14 area.
Today’s volume (denoted by the horizontal light blue lines) was exclusively concentrated at strikes above 14, so expecting the VIX to imminently plunge by 6-7% daily until 12 is established truly places you within the “Super Contrarian” category, when combined with VIX lows over the past year or so (and I consider myself a contrarian).
What’s the alternative? Sadly for the bulls, a VIX spike from the 14-15 area, which at this rate of decline will be hit tomorrow or Monday.
Yesterday we noted that a trip to 6500 seemed quite likely given QQQ closing just above the Hull and SPX closing right at the line, and sure enough, we saw continuation today, now within 35 points of the weekly Hull at 6537.
Given that this will be the 6th week below the weekly Hull, and the VIX crushed back to almost 15 again, what happens next? A close above the weekly Hull after a mostly uninterrupted rally since April, with upside continuation to follow?
QQQ had the most bullish close on the 3rd, and the most upside currently, with 580 representing the largest GEX cluster and 583 representing the weekly Hull.
Net GEX for QQQ increased into positive territory (though still within our neutral range), possibly signaling upside toward the 580-583 area.
Given the trend of rejection at the weekly Hull, we want to see a solid close above the line to signal further upside, also with accompanying GEX at higher strikes. Until then, we plan to exercise caution in acknowledging a possible pullback or retest of recent lows prior to continuing toward higher targets.
IWM reached the lower edge of the target we mentioned recently, closing at 236.59. A move up to 240 would not be surprising tomorrow, though GEX is still not substanital above 240.
We still view a move above 240 as likely this year, even with the possibility of an intermittent pullback.
IWM has shown relative strength compared to other indices, so we view dips as buying opportunities, with an eye toward 230 and finally 220 in the event of a near-term drop.
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