Thursday was a mixed bag, with SPX printing a contrasting lower low as well as a higher high (though closing below 7600), QQQ printing a lower low and a lower high, and the VIX printing a higher low and a higher high. GEX generally moved more negative for indices across the board, though SPX and QQQ remain in essentially neutral territory. Tonight we’ll look at the argument for a “one more low” scenario, and no, that isn’t a reference to NVDA’s Huang (still too soon? Email our post-scandal respect manager K. Duddy Wood at support@geeksoffinance.com).
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Net GEX and Keltner Divergence Increases the RIsk of a 450 Retest for SMH
SMH has printed four daily green candlesticks, and ultimately all we’ve seen is a retest of the strong downtrend line, with negative GEX in place and the top 3 net GEX clusters ranging from 475 all the way down to 400. Maybe that little gap at 400 gets filled? NVDA is roughly 20% of SMH’s portfolio, but fundamentally, NVDA’s selloff has culminated due to announcements of personal indiscretions on the part of an executive, which doesn’t in and of itself destroy the product or demand for the product. And NVDA is core to the entire AI industry, if you study the comically interconnected deals between the top companies. So without offering an opinion, betting that Huang sinks NVDA is almost akin to calling the top of the AI bubble, and I don’t know that we can make that call just yet.
-Primary Scenario: SMH retests 475 and bounces, at which time we’ll reassess GEX and the charts.
-Secondary Scenario: SMH plunges straight to 400, then murders bears with a big rebound.
Key Levels: Bullish above 500 targeting 520. Bearish below 475 targeting 450, 400.
All Eyes on 680 for QQQ, Risk to 650 Below
QQQ is largely driven by the Mag Seven and by the semiconductors, which often play “Musical Chairs” in terms of leadership, so we’re opting instead to focus on key levels for QQQ in general. A loss of 680 may quickly result in a retest of 650, while a rally beyond 690 may see 700 or even 720. Concerningly, the Keltners are aligned now to the downside, reflecting a solid downtrend, so bulls will really need to step it up with recapturing 690.
-Primary scenario: QQQ drops to retest 650, then rebounds toward 680.
-Secondary Scenario: QQQ retakes 690, then fails at a 700 retest.
Key Levels: Bullish above 700 targeting 720. Bearish below 680 targeting 650.
SPX GEX Turned Negative (Again), Positive GEX Clusters still Merit Attention
SPX looks more neutral than QQQ or SMH, introducing either the possibility that we see a major rotation into value, or perhaps this time QQQ is correct in leading to the downside. Small caps also look less negative, which is a mark in favor of a rotation theme. While SPX net GEX moved more negatively today, it’s worth noting that SPX does have some large net GEX clusters above 7700. On the contrary, SPX moving below 7500 likely targets 7300.
-Primary scenario: SPX retests 7450-7500 intraday, closes above 7500, and begins a larger rebound.
-Secondary Scenario: SPX closes below 7500, beginning a drop to 7300.
Key Levels: Bullish above 7500 targeting 7650, then 7700. Bearish below 7500 targeting 7300.
The VIX Closed the Cash Session With Positive GEX, Retest of 20+ on the Table
So far, GEX refuses to meaningfully grow below the 17 strike. We’ve seen the play before where the VIX slightly overshoots the rational downside target, then rockets. This time around is not much different (so far), with a drop to 17.38, while GEX quietly closed in positive territory after a one-day foray into negative territory, closing above the 18.70 middle Keltner. A daily close below 17 increases the odds of more downside for the VIX, but until then, it appears that we might see a VIX retest of 20-22.
-Primary scenario: The VIX retests 20, potentially 22, hen rejects back to 17-18.
-Secondary Scenario: the VIX loses 17, seeing a shift in GEX toward lower strikes ranging from 14-15.
Key Levels: Bullish (for volatility) above 18 targeting 20-22, bearish below 18 targeting 16.
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