The VIX: Spike Potential Into Monthly VIX Expiration?
Monthly VIX options expire Wednesday premarket, so we typically look at the largest GEX clusters expiring that day. As of now, negative GEX at 17 and positive GEX at 20 are the largest net clusters visible, and the VIX shows positive total GEX. SPX retested and failed near 7520, and the close below 7450 may bring a test of 7400, as discussed in last night’s newsletter. QQQ actually looked like it was holding up relatively well most of the day above the 700 strike, but the close at 696 shows choppy action around this level. A close below 693 may bring 680 or even 660 below that. IWM may be targeting 280 soon. Let’s look at upside and downside targets across the board from our point of view.
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The VIX Almost Reached 17, Now A Proper Test Of 20?
The VIX made an intraday low of 17.41 before bouncing a point into the close, not quite testing the large negative cluster at 17. Another move lower could be in store if futures hold their gains, but as long as the upturned daily HMA and 9 SMA at 16.65-16.74 hold as support on a daily close, risk of a VIX spike to 20 or higher remains. We view the largest net GEX clusters at 17 and 20 as a potential range to watch until they expire Wednesday before the market opens, so we will watch for changes leading up to expiration and the cash session thereafter.
Key Levels: Bullish above 18.14 targeting 20-25. Bearish below 18.14 targeting 16.65 potentially.
SPX May Be Headed For 7400 Or 7343
SPX came very close to testing the daily 9 SMA today, failing within 5 points of 7518 and closing at lows of the day below 7350. The close is not a good look, and we view any rally attempt that can’t complete a daily close above 7545 as a potential “sell the rip” opportunity. Given that 7545 is now 102 points higher, we can point out some closer targets that we will view as preliminary, such as the weekly 9 SMA at 7468 and the big GEX area at 7500, just 4 points above the 9 SMA at 7495. Failure to recapture 7468 is the most bearish scenario, and we do see growing GEX at 7300. But I wouldn’t be surprised if such a drop would be made difficult for bears, so we remain open to the 100-point upside scenario. We’ll take it one level at a time with the help of 0 DTE GEX after the cash session opens.
Key levels: Bullish above 7468 targeting 7500, then 7550. Bearish below 7450 targeting 7400, then 7343.
QQQ: Watching 690 And 709
QQQ spent most of the day above 700, but then gave out late in the day, dropping back below 700 to close at 696 even (how cute). I do think it’s noteworthy that QQQ closed above Friday’s close, though cumulative net option flow is mixed and net GEX has grown at lower strikes down to 660, matching what we see with SPX. The problem we hope to solve as traders from a directional perspective is more a matter of timing, if we assume the negative GEX implies lower prices: Does QQQ head to 660 in a straight line, or do we see a rally before resolving lower? We remain flexible and hedged while awaiting either a break of 690 or 710.
Key Levels: Bullish above 710 targeting 730, bearish below 690 targeting 680, then 660.
IWM Still Holds Above 290 Despite Some Negatives
IWM is still holding above 290, which leaves open the possibility of a spike back to 300+. But the net picture certainly suggests that odds are increasing of a tag of 280, even if we climb first. Retaking the daily HMA at approximately 294 will open the door to 300, in our view.
Key Levels: Bullish above 294 targeting 300, bearish below 290 targeting 285, 280.
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