A consistent theme for earnings season has been harsh punishment. GEX has advertised this as far as big tech companies, with QQQ reflecting 690-700 as the largest net GEX clusters for days on end. We’ve noted this in prior newsletters, and it looks like the overnight session will be testing the 700 level in short order. SPX may retest 7650 and the VIX may finally see some form of upside, but we want to deal with what the total picture says about the odds of upside or downside into year-end.
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SPX may gap Below 7700, potentially Below the HMA at 7676, Recovering 7600 is key
Last night we mentioned that “only below 7650..We may see a larger shift toward probabilities of lower prices,” and that remains true, with large negative GEX at 7650 that may see dealers flip toward buying. 7600 could also come into play, so we need to watch action around 7650. Option activity was elevated at the 7550 strike, also representing the 2-hour lower Keltner channel (not visible on the daily chart I shared), so we have some logical reasons to at least be open-minded to a deeper drop. The HMA at 7676 really needs to be retaken (in my opinion) to flip the script back in favor of the bulls.
-Primary scenario: SPX retests 7650, setting a higher low and igniting a rebound toward 7700-7750, at which point we’ll reassess the full picture.
-Alternative scenario: SPX makes it to 7600, shifting the bias lower, though a bounce to 7700 can still occur.
Key Levels: Bullish above 7700 targeting 7750, 7800. Bearish below 7700 targeting 7650, 7600.
QQQ Finally Breached 700 After Hours, HOlding 700 is key for Bulls
QQQ may finally test the 700 strike, and 690 looks even better, marking a large net GEX cluster that aligns with the lower daily Keltner channel. While a tag of the lower Keltner will appear to be a continuation of the downtrend, note that we haven’t tagged the lower Keltner, and the last 2 times we came even somewhat close marked pivot points. Anything between 680-690 could see at least a strong temporary bounce, if not more.
-Primary scenario: QQQ tags 690, then begins a rebound to retest 708p (the HMA).
-Secondary Scenario: QQQ bounces from 700, reaching 710 before consolidating.
Key Levels: Bullish above 700 targeting 710, 715. Bearish below 700 targeting 690, 680.
IWM Reaches the Objective- Rally Looks Corrective; 270 Retest in Store?
IWM is one reason the VIX was lower, with stocks outside of tech offsetting tech weakness. VIX is based on SPX options, so SPX hasn’t yet provided a reason for a VIX spike (until after-hours Thursday).
-Primary scenario: IWM retests 280, potentially toward 270.
-Secondary scenario: IWM starts out the day around 270, then rallying toward 290.
Key Levels: Bullish above 284 targeting 290. Bearish below 280 targeting 270.
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