AI Collapse: Beginning of the end, or Setup for Rally into December?
We aren’t going to answer the question, because we don’t know, but we will be tactical in reacting to breaches of support and resistance as we navigate monthly option expiration. What is a collapse, anyway? Depends on who you ask, and if they’ve survived multiple 10%-20% corrections or the recent 2-3% micro-dips. The VIX maintains a setup for a spike from as low as the 14-14.5 area while QQQ appears headed for 740, but SPX is still aiming for upside, at least if 7800 holds on a daily close.
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QQQ Appears to be Headed for a Minimum tag of 740
QQQ made the lowest close since October 1st, continuing an overall 5-day downtrend and bottoming intraday roughly 50 cents above the daily 15 EMA at 744.31. Distance is growing between price and the daily HMA at 756.15, so a snapback move to retest the HMA should be no surprise, especially during OpEx week. Recapturing 750 may improve the odds of retesting 756 and potentially tagging the largest net GEX cluster expiring this week at 760.
-Primary scenario: QQQ tests and closes above 740, resulting in a rebound to retest 750.
-Alternative scenario: QQQ loses 744, closes below 740 and heads toward 730.
Key Levels: Bullish above 750 targeting 760. Bearish below 750 targeting 740, then 730.
SPX OUTPERFORMS; still Appears likely to Tag 7850-7900 (with a Caveat)
The persistent and upward ascending HMA for SPX creates a narrow pathway for SPX to maintain gains toward 7850-7900, but GEX still justifies continuation along the way. A daily close below the 7794 HMA might negate continued upside, with the next focus being 7758. Keep in mind that many SPX components were already beaten to dust before recent weakness, so even temporary rotation from tech to the broader market shouldn’t be a surprise, though any lasting impact on a larger rotation are purely speculative.
-Primary scenario: SPX holds a 7794 HMA retest, retakes 7800, and heads toward 7820-7850.
-Alternative scenario: SPX fails to hold 7794, dropping toward 7750 and 7700.
Key Levels: Bullish above 7800 targeting 7850, 7900. Bearish below 7794 targeting 7750, 7700.
IWM GEX This Week Reflects a Slight Shift in GEX toward 275 from 270
IWM’s chart still looks like 270 can be tagged, but interestingly, GEX for this week shows more interest in the 275 strike. Such a shift could indicate lower odds of reaching 270 this week, though a more conservative approach may be to focus on 275 and what happens at 275 before betting on a tag of 270. IWM net GEX remains extreme and a rebound toward 280 appears to be a good possibility.
-Primary scenario: IWM bounces from 275 toward 280, potentially continuing toward 285.
-Alternative scenario: IWM drops to 270 and eventually rebounds toward 280.
Key Levels: Bullish above 280 targeting 100. Bearish below 275 targeting 270.
The VIX Consolidates While Maintaining Positive net GEX
The VIX maintains pathways toward ither 14-14.5 or 16+, so we keep an eye on it. The lower timeframes suggest limited downside toward 16.5, and we’ve been in a positive GEX situation with the VIX for 2 days now.
-Primary scenario: Spike toward 16-17, then fade back into range.
-Alternative scenario: VIX spikes to 20 by the end of the week, the low represents a good buying opportunity into year end.
Key Levels: Bullish above 16 targeting 17, 20. Bearish below 15 targeting 14.5, 14.
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