SPX: Whipsaw Or Washout?
SPX teleported lower with Thursday’s gap down, allowing only the night crew to have fun with the volatility from 7499 to 7418. The levels we’ve identified and the accompanying apparent ramifications of reaching these lower levels seems to be in play, with the intraday high at 7450 rejecting. The close above 7400 does preserve the chance to see another rebound from here, potentially to 7450-7500, though the burden is now on the bulls to save SPX from a drop to 7339 or lower.
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SPX: Close Above 7400 And Positive Flow Look Encouraging For Friday
Today’s gap down did bring SPX quite far below the daily HMA, which potentially indicates the selloff today brings SPX to a spot that is a little over done for this moment in time. The lower dealer cluster captures this sentiment indirectly by reflecting the largest net negative GEX cluster at 7400, stretching down to 7300. 7400 was recaptured as potential support as of today’s close, but bears may have a little more fun with a move down to 7300 after an intermittent bounce. Cumulative net flow (far right) shows significant positive option flow toward 7500 for tomorrow, so a whipsaw back up to test that zone is possible.
SPX Weekly SUggests We May Dip Further Prior To Resolving Higher
I mentioned 7339 earlier. Where does that number come from? It’s the weekly 9 SMA, a level barely 37 points below today’s intraday low. Below 7300, we may target 7200, then 7000. The total flow and total GEX picture shown below still shows significant positive activity and GEX, so we may see a deeper drop resolve higher in coming weeks/months, though we have plenty of time to follow the daily shifts in the GEX and flow picture without needing to guess the future right this minute.
Key levels: Bullish above 7463 targeting 7500, then 7587. Bearish below 7400 targeting 7339, 7300.
QQQ Heading For Second Straight Weekly Close Below 700
QQQ closed below 700 and below the 15 EMA at 693.27, so as my pet parrot Polly Tudor Jones would say, “no bueno!” GEX and option flow look more negative than for SPX, with 680 as a potential target Friday. The total picture looks a little less convincing, with 715-720 seeing a lot of positive and negative activity. The daily middle Keltner channel aligns with 715. While SPX and QQQ often perform differently to some extent, in general, I would expect a rally for SPX to at least have some positive influence on QQQ given the Mag 7 overlap, and 700 is still the largest net GEX cluster.
Key Levels: Bullish above 700 targeting 710, then 715. Bearish below 693 targeting 680, then 660.
IWM Shows Resilience, Still Carries SHort-Term Risk To 285
IWM opened at 290.88, and buyers just couldn’t help themselves, stepping in to lift IWM to close over 292, down barely half a percent on the day. We can’t ignore option flow though, which was more negative, and 285 remains as a potential destination. IWM remains closer to its all-time high than SPX or QQQ and the lack of a breakdown may carry positive implications for the other indices, unless small caps rally by themselves in a “this time is different” twilight zone (entirely possible if this is a late-stage final rally, I guess).
Key Levels: Bullish above 294 targeting 300. Bearish below 290 targeting 285, then possibly 280.
The VIX May Retest 18 Before Heading To 25
The VIX crossed under the HMA on lower timeframes as the HMA is almost flush with the upper Keltner channel, a condition that often coincides with volatility tops (in the case of the VIX). The chart below shows at least 4 such instances in a short timespan, for instance. This doesn’t mean the VIX is done necessarily, and during a climactic spike, the VIX can blast through all theoretical indicator lines on all timeframes for a short span of time, reflecting maximum fear. If this is a more “normal” situation, we could potentially see the VIX reach toward resistance on higher timeframes at the 25 strike. Another alternative would be that the VIX needs time to consolidate before another move higher, anywhere from a few hours to maybe a day or two. Flow continues to be positive at higher strikes, including strikes up to 30. The VIX likely still has limited downside in the event of a vol crush, with 16 being the lowest target showing meaningful GEX.
Key Levels: Bullish above 20 targeting 22, then 25. Bearish below 18 targeting 17, then 16.
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