SPX saw its biggest weekly point drop since the week ending 3/30/2025, the week prior to the correction low and reversal that saw a major rally lasting almost a year. We see contrarian signals pointing to a larger bounce being imminent, yet we also see factors that may involve lower lows before such a bounce, similar to the week that followed 3/30/25. Tonight we look at key GEX levels heading into this week as well as accompanying pivot areas that may come into play.
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SPX GEX Mostly Between 7200-7520, Bounce to 7500+ After 50 EMA Test?
Friday’s weak bounce saw indices close not far from lows, yet SPX still hasn’t touched the weekly 50-EMA, a level we mentioned Thursday as well. SPX is far enough away from the weekly HMA to justify a bounce, and the largest GEX clusters for this week range from 7350 to 7500, yet we see enough substantial GEX all the way down to 7200 to justify a drop just beyond the 50-EMA. A test of the 50-EMA would be in-line with what we’ve already seen with QQQ as well.
-Primary Scenario: SPX drops to 7250-7200, then begins a larger rebound to retest levels as high as 7500-7520.
-Secondary Scenario: SPX begins a rebound immediately toward 7500, requiring reassessment of any changes in the GEX picture upon testing 7500.
Key Levels: Bullish above 7350 targeting 7400, 7425 initially. Bearish below 7350 targeting 7300, 7250.
QQQ 671 Retest Appears Likely, Failure at the 50-EMA may Bring 600
QQQ shows 2 important levels heading into this week:
1) 670, around the 50-EMA level and a gateway to higher prices up to 700.
2) 650, another gateway toward lower prices, with the next target being 630, looking strictly at next week’s GEX.
QQQ is quite stretched below the weekly HMA, so a large bounce wouldn’t be surprising, though we need to tactically consider what GEX is telling us in terms of key levels to the upside and downside.
-Primary scenario: QQQ drops as low as 630, then begins a recovery back toward 670-700.
-Secondary Scenario: QQQ rebounds toward 670-680, then fails upon the first attempt to break through that zone.
Key Levels: Bullish above 671 targeting 685-700. Bearish below 670 targeting 650, 630.
IWM Tested and Held the Weekly HMA, Watching 260-265 for a Solid Bounce
IWM’s consolidation gives hope to bulls, yet most of the GEX for next week’s expirations are clustered between 265 and 280, with downside targets showing most of the GEX.
-Primary scenario: IWM drops to 265, then begins a larger rebound.
-Secondary Scenario: IWM rallies and holds above 280, causing the GEX picture to shift more favorably.
Key Levels: Bullish above 275 targeting 280-285. Bearish below 270 targeting 265, 260.
The VIX still has Risk to 30-35, Spot VIX at a Premium to Futures Gives Bulls Hope
Historically, when the VIX spot price is higher than VX futures, a bottom is forming. The caveat is that such conditions don’t always mark the exact day of the bottom, but rather a more general timeframe, which fits into the bigger picture where other factors point to further downside risk for indices. How do we make sense of such divergences? Risk/reward for new short positions doesn’t look appealing, but we may still see brief further downside for indices before a meaningful bounce. “Meaningful” doesn’t necessarily imply an end to the correction, but merely a bounce that could be a relief rally, or it could be the beginning of something larger. This is why we’ll reassess when the first rebound targets are being achieved. The VIX is still in a strongly positive GEX position and the 60-minute chart shows a flag that could culminate in another push higher.
-Primary scenario: The VIX rallies to 30+ before being crushed back below 22, potentially marking a bigger turning point.
-Secondary Scenario: The VIX loses 22 without further upside, leading to the VIX working its way back toward the 15s.
Key Levels: Bullish above 25 targeting 30-35. Bearish below 22 targeting 20, then 17.
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