Tuesday’s CPI resulted in a gap down to start the cash session, with SPX printing an inside day while the VIX was kept at bay with a close below 20. Today’s lack of follow through to the upside keeps open the possibility of a retest of lows, or worse, so let’s look at GEX and the charts as we approach Wednesday’s session.
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The VIX may be HEaded for a Retest of 18, GEX was still Positive as of Today’s Close
The VIX closed the cash session with positive net GEX (visible on the Historical Net GEX graph below the chart), but drifted into negative GEX territory after 4pm ET, hence the negative GEX reading on our Dashboard label. The move lower is directionally encouraging for bulls, and another day or two of negative GEX readings will look even better in terms of a sustainable bottom for indices. The problem is the series of higher highs going back to mid-October, and the candles preceding progressively larger spikes were often pressed further down to an extreme right before the spike. This same possibility exists now, with 18 being the most likely strike where the move can reverse higher again.
-Primary Scenario: The VIX tests 18, then rebounds to make a lower high at 25.
-Secondary Scenario: The VIX spikes to 22, then fails, marking a lower high and fueling a VIX crush back to 17-18.
Key Levels: Bullish above 20 targeting 22, 25. Bearish below 18 targeting 17, 16.
SPX GEX and the Keltner Channels suggest Heightened Risk in Both DIrections
SPX net GEX for this OpEx cycle is mostly between 7400-7700, with 7500 currently representing an important pivot. The lower Keltner channels is quite some distance below the HMA and the current price, raising the possibility that SPX retests 7400 or even makes a new low. Continuing to hold above 7500 looks bullish, though.
-Primary scenario: SPX retests 7400-7450, holds, then recovers back above 7500.
-Secondary Scenario: SPX tests 7600, then drops back toward 7500.
Key Levels: Bullish above 7520 targeting 7600. Bearish below 7500 targeting 7400.
Most of QQQ GEX is Between 640-685, 650 is the Largest Net GEX Cluster
QQQ is still in negative GEX territory, with 650 standing out as a huge support area, some 24.8 points below the current price. The moving averages are pointing lower and most GEX is below 685. Option flow was bullish, though, so we’re aware of the risk of a rebound. Until 690 is recaptured, we may see choppy action.
-Primary scenario: QQQ tests 650 again, then rebounds to 680+.
-Secondary Scenario: QQQ pushes to 685, then drops to 650.
Key Levels: Bullish above 685 targeting 700. Bearish below 650 targeting 640.
IWM Upside Goal of 285, Downside Risk to 270 or Lower
IWM looks more bullish than other indices overall, with IWM actually a little higher than it was in September. GEX is spread across a wide variety of strikes, ranging from 260-290, and price is holding above the daily HMA (so far). continuation to 285 or higher starts to look better for the bulls, with downside action toward 250 building a more sustainable low.
-Primary scenario: IWM rallies to 285, then reverses, heading lower.
-Secondary Scenario: IWM retests 290, then heads for 270.
Key Levels: Bullish above 280 targeting 285. Bearish below 280, targeting 270.
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