Indices Enter August OpEx Cycle Below Key Support
For OpEx week, we repeated key levels we were watching multiple times: Especially SPX 7480 and QQQ 700, to cite our view of what may end up being triggers for further downside. We also mentioned the VIX above 17 potentially targeting 18-20 initially. Unless you just spent the last 3 days researching how to grow your own lettuce or stalking your neighborhood raccoon that you think might have the same condition as “Jimothy,” you've noticed that indices opened well below those levels with Friday’s gap down and also closed below those levels. The VIX topped at 19.50. With increasing downside risk, we’re watching key levels above and below that may help us navigate what comes next, in conjunction with GEX.
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SPX: Mostly Positive Options Flow, Watching 7400 Below
Two things were true Friday: SPX lost the key 7500 and 7480 areas we’ve been watching, and Cumulative Net Flow was positive looking at the upcoming week. Such a paradox can have several possible explanations, but the one that pops into my mind first is that SPX may soon see a rally soon that tests previous support-turned-resistance. A move higher than fails may see targets fulfilled down to at least 7330, if we don’t see a move straight down before any such bounce. SPX really needs to overtake 7562 to negate Friday’s OpEx “surprise.” The 50 EMA at 7403 is the next area to watch for a possible bounce, if one doesn’t materialize from Friday’s close.
Key Levels: Bullish above 7503 targeting 7525-7560. Bearish below 7450 targeting 7400.
QQQ Shows Negative GEX Growing At 660
QQQ lost the big 700 GEX area Friday, touching 686.76 before rebounding to close at 695.30. We mentioned 690 recently, and 686 has come up in discussion numerous times prior, so that zone between the two appears to have importance. Net option flow was positive Friday, just like we saw with SPX, and QQQ is in the lower Dealer Cluster zone. While 660 may come into view soon, the GEX picture plus Friday’s net option flow suggests we may be close to a bounce, fitting with what we said about SPX. A loss of 690 and especially 680 brings 660 into focus as a destination with improving odds of being reached.
Key levels: Bullish above 700 targeting 715. Bearish below 690 targeting 680, then 660.
IWM: Might Reach 280, Not Much To Complain About-Yet
IWM has seemed reluctant to participate in downside, remarkably, though some factors are starting to look weaker, including the candle wicks the last 3 trading days and the daily close below the declining HMA and 9 SMA. We also see negative flow at 297, though we see positive flow at 290. IWM still appears to be a potential candidate to buy on a dip given the relative performance witnessed recently.
Key Levels: Bullish above 295 targeting 300, bearish below 290 targeting 280.
The VIX Needs To Fail Now, Or We May See The Quarter Century Mark
It takes less typing to say “VIX 25,” but that wouldn’t sound as dramatic. The VIX reached the upper end of the 18-20 range that we felt could be achieved last week with the setup presented, and now participants need to demonstrate their resolve for either a crush back toward 16, or an additional spike toward 25. Last week we saw repeated Cumulative Net Flow at the 19-19.5 strike, and we told you about it, and Friday saw big positive flow at the 26 strike. Will 25-26 come to pass soon? The VIX did close above the 15 EMA for the first time in 3 weeks, though the last close above marked a top. As we approach the monthly VIX expiration Wednesday, we see the largest negative cluster at 17, and the largest positive cluster expiring at the 20 strike. We’ll be watching changes in the VIX GEX picture as we approach Wednesday.
Key Levels: Bullish above 20 targeting 25, bearish below 18 targeting 17.3, then 16.
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