QQQ High A Month Ago, VIX At 15: September 8 Market Preview
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Tonight’s YouTube video can be viewed by clicking here. It’s short and we offer some complementary data points not covered in tonight’s newsletter, so give it a look!
Let’s conduct a brief review of what has happened lately and how we see the near-term unfolding:
QQQ hasn’t made a new high since August 11, despite SPX making a new high (a negative divergence), and the VIX has refused to lose 14 all year, currently holding above 15.
We continue to view any tests of 14 or below to be “show me” levels, meaning we’ll believe it (and adjust accordingly) only when it happens. We have all year (so far) to see the VIX holding consistently above 14 and beginning upward moves for volatility from the VIX 14-15 area. Is this time different?
The complicating factor is the steady increase of GEX at higher strikes this year, leading us to believe that even a short-term correction will likely need to new highs in coming months, at least based on GEX changes we’ve seen in recent months. Let’s look more closely at the VIX for additional insights:
tradingview.com
Looking at the VIX this recent Friday, we see the VIX spiking on the 4-hour chart at a higher low than in late August, and we currently see a setup for another spike, unless the VIX is going to completely change character and head for a sub-14 reading (entirely possible).
Shifting toward the major indices, major indices continue holding at key weekly Hull Moving Average resistance, with QQQ not even able to breach the August 13 high from nearly a month ago.
The 1st and 3rd largest net GEX clusters (excluding last Friday’s expiry) for QQQ are negative clusters at 550 and 560. If participants expect QQQ to breach 580 and fly higher immediately, why isn’t GEX skewed more toward positive strikes? Dealer responses to retail biases being too bearish? I am not being rhetorical with the question, but rather suggesting a limited number of logical answers. Retail bearishness is certainly a catalyst we’ve observed in the past, but with the GEX intensity gauge nowhere near an extreme, we see GEX at least suggesting GEX can become more bearish before giving us an actionable contrarian signal to buy a dip (note I say “a” and not “the” given the recent blistering rally).
SPX saw similar rejection at the weekly Hull, despite making a new all-time high, also within the upper Dealer Cluster zone, reflecting rejection at the largest positive GEX cluster.
Negative GEX remains elevated at 6000 and we see diminishing positive clusters above 6500-6600, reflecting participants assigning lower odds to those higher clusters in the near term, for the time being.
Unless QQQ can close the week below 567 and SPX below 6381, the bias remains higher, so it’s worth noting that we should be aware of diminished odds of sustaining moves higher while also recognizing that the rocket can continue higher until certain key levels are breached. Perhaps an intra-week high that is met with a meaningful reversal? We’ll remain open to anything while maintaining asymmetric hedges using options against our long positions, as this process has served us well in the past.
SPX net GEX closed Friday with a drop in positive GEX toward the zero line, another negative divergence as SPX GEX is still lower than it was nearly a month ago.
SPX closed Friday still holding above key daily support of the Hull and 9-day SMA, at least introducing the possibility that we move higher before dropping, a possibility we just suggested. Whether or not this move concludes overnight Sunday or not we don’t know, but 6465 is an important line-in-the-sand for the short-term bull/bear picture.
Given the conflicting signals, I read the daily picture to signal caution below 6465, and a stronger bear bias below 6381 (good luck in the chop zone).
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