QQQ poked its head into positive net GEX territory as of Wednesday’s close, only to be sent back to Negative Town as soon as GOOGL reported earnings. The cash trading session itself leaned bullish, though the rally fizzled out toward the FOMC press conference, unable to break in either direction as premium died a nasty death. One thing that apparently never dies is this never-ending consolidation within a 4% range, but let’s look at the GEX picture just in case this half-mast flag is about to go all the way up or down.
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The VIX is Testing the Volatility “do or Die” Level at 16.5
The VIX remained suppressed all day, pressing toward the 16.5 area, and after-hours volatility saw a touch of 16.21 before hammering its way back up to 16.91 on the 1-hour chart. We’ve been discussing the risk of a VIX spike to lower highs at a minimum, and despite today’s antics, a spike still appears possible based on overnight action. The positive shift in the GEX picture for indices moves the burden of proof to the bears to overtake the 17 strike again for a move toward 18-20.
-Primary scenario: The VIX makes a lower high between 18-20, then drops toward 15 in coming days.
-Alternative scenario: The VIX closes above 20, leading to a quick ride to 25-30 in coming days.
Key Levels: Bullish (for the VIX) above 17 targeting 18-20. Bearish below 16.5 targeting 15.
SPX Dip Looks Buyable to 7650, UPside Scenario Needs a Close Over 7750
SPX remains stuck in a relatively narrow range, with 7600-7800 reflective of where most GEX is concentrated. SPX would need to lose the big GEX area at 7700 to entertain 7650 or 7600, and really, it’s only below 7650 that we may see a larger shift toward probabilities of lower prices.
-Primary scenario: SPX holds any test of 7700 and rebounds toward 7800.
-Secondary Scenario: SPX holds a 7650 retest, then rallying back above 7700 to signal upside potential in coming weeks.
Key Levels: Bullish above 7750 targeting 7800+. Bearish below 7700 targeting 7650, 7600.
Downside Appears Limited for QQQ as Long as 710 Holds
QQQ hasn’t really shown its hand lately either, with 690-740 showing the largest concentration of GEX, though 700 is the largest net GEX cluster across all timeframes. While a large net GEX cluster represents a likely magnet in our view (hence our focus on 690-700 in recent days), they can also end up being reversal areas. QQQ does show net GEX down to 670 in meaningful quantities on a total timeframe, the next two weeks shows 700 as a likely pivot, and that’s only if QQQ manages to slice through the relatively thick GEX clusters we see between 610-615.
-Primary scenario: QQQ holds an initial retest of 710-715, then begins a rebound.
-Secondary scenario: QQQ reaches 690-700, then begins a rebound.
Key Levels: Bullish above 725 targeting 730, 740. Bearish below 710 targeting 700, 690.
IWM Closes Just Below the 9 SMA, we may see 284 Before a 277 Retest
IWM made some headway toward the 284 target we mentioned last night, closing near highs of the day just below the 9 SMA. The moving averages on the weekly chart are still pointing lower, so IWM needs to overtake 284 and start moving sideways or we could see a move back to 276 to retest the HMA. At this time, GEX is not indicating much faith beyond 284 for the next week and a half, and bearish option activity has been elevated at the 240-255 strikes.
-Primary scenario: IWM makes it to 284, then consolidates, potentially retesting 275 before another move higher.
-Alternative scenario: IWM tags 284 and then moves down hard, closing below 275 and opening the door to 270.
Key Levels: Bullish above 280 targeting 284. Bearish below 279 targeting 275, 270.
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