SPX Rejects at key Resistance
Last night’s primary SPX scenario was “SPX rallies for the last day of Q3, potentially reaching 7700-7710, then drops toward 7600.” What a beauty. We rallied a little past 7710 by .15%, and dropped precipitously into 7650, shy of the 7600 target, but overall, the general target and pivots were right. We will not be correct with our educated guesses every time, of course, which is why we go over tactical levels. A trader who isn’t flexible to adjust to conditions won’t be a trader for long. As of now, the daily candles look bearish, and the VIX closed above the HMA on various timeframes, so we’re looking toward 7600-7625 to potentially be tagged, with an eye toward overhead resistance at 7680-7700 if SPX reverses higher again.
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SPX Weakness: Retest Before 7800, or 7600 Next?
SPX rejected almost perfectly off of the daily HMA, leaving the weekly HMA at 7758 untouched for now. With the close above 7650, we now have 2 potential scenarios in play, and I don’t have as high of conviction as to what’s next as I did last night. We’re either headed for a 7600 test, or we’ll strongly recapture 7700, which may be a sign that the downside is over for now.
-Primary scenario: SPX drops toward 7600, then rebounds, we’ll reassess upon reaching overhead resistance in this scenario.
-Alternate pathway: SPX immediately climbs at Thursday’s open to retest 7680 or 7700, at which point we need to reassess whether failure is likely or a move toward new highs.
Key Levels: Bullish above 7700 targeting 7750, then 7800. Bearish below 7650 targeting 7600.
QQQ still Reflects Limited Upside, 725 Retest may be due
QQQ also rejected sharply from the daily HMA, yet QQQ still maintains above the 9 SMA support at 739. QQQ’s GEX picture for this week and next points to limited further upside, potentially to 750, and downside targets of 725 and 730 if QQQ remains below 740.
-Primary Scenario: QQQ retests 725-730, then rebounds to 740.
-Alternate Scenario: QQQ immediately rallies to 750, then potentially fails or consolidates for some time.
Key Levels: Bullish above 740 targeting 745, 750. Bearish below 740 targeting 730, 725.
Mixed Picture for SMH: 630 or 570?
Semis have been strong lately, even with the daily red candles. The technical issue that concerns me is the failure to recapture the HMA, which is almost up to the upper Keltner channel. These two lines meeting often mark topping zones. The GEX picture is more bullish, pointing to 650 and even 700 as potential targets. Given the contrasting pictures, it’s possible SMH needs more time before tackling higher targets.
-Primary Scenario: SMH tests and fails 615, then dropping to 600.
-Secondary Scenario: SMH rallies to 630, then drops toward 600.
Key Levels: Bullish above 610 targeting 615-625. Bearish below 610 targeting 600.
The VIX Once Again Approaches 17- Failure or Rocketship to 20+?
The VIX rallied again today, staying stubbornly above the mid-15 range, perhaps an indication that this move higher for volatility ends with a larger spike. Our primary scenario in last night’s newsletter suggested a drop toward 15, then a spike toward 20. While technically this was correct in terms of direction, the first move down didn’t make it far, bottoming at 15.62, and the move up stopped near the high of the day at 16.51 (obviously not 20). I was hoping to see a drop to 15, but that only becomes more likely with a loss of 15.70. In the meantime, GEX has dipped to even deeper negative territory, with most of that GEX at the 16 and 17 strikes. The concentration at these strikes emphasizes the importance of 16 and 17: Below 16 (and even better- 15.70) we anticipate a trip to 15. Above 17 and we might see a quick move to 20. Negative GEX growing at strikes very close to the current price is NOT helpful in determining the next magnetic GEX target, unless the VIX is going to be stuck between 16-17 for some time. I doubt it.
-Primary Scenario: The VIX makes another attempt lower, then reverses, finally making it up to 20.
-Secondary Scenario: The VIX spikes toward 20, then drops toward 13-14 into year end.
Key Levels: Bullish above 17 targeting 20. Bearish below 15.7 targeting 15, then 14.
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