SPX 7300: Rebound Or More Downside?
SPX nearly touched the 7300 target we’ve been discussing all week as a strong possibility given the GEX picture. This may be where things get a bit tricky: We are likely near a nice bounce area, but SPX could have another 100-200 points downside before this move is completed. The VIX may end up reaching 25-30 in that scenario. On the positive side, option flow was positive, and contrarian signs point to a strong possibility of a bounce soon, whether before another leg lower or immediately after another push lower. Let’s look more closely at levels we’ll be watching.
Members save $300 on the annual Portfolio Manager plan with code SUMMER26 at checkout, which will run a few more days.
The VIX Has The Setup To Reach 25- Unless 18 Is Lost
The VIX closed at 20.49, just above the key 20 GEX area. Leading into today’s market drop, we noted the positive option activity for the past week at the 20-22 strikes, so that forward “warning” of sorts appears to have played out. Flow was actually negative today on the VIX, and we’re close enough to the 20 strike to be aware of risk in either direction at this point: A break of 20 to the downside needs to hold a test of 18 to keep the upside to 25 alive, in our view, while a break below 18 may take us back toward 16. The VIX is overbought according to the %b indicator on my 2-hour chart, which isn’t a guarantee that the VIX doesn’t spike further, but it is a condition often associated with VIX pullbacks, so we’ll keep an eye on the VIX for potential signals impacting the broader markets tomorrow morning.
Key Levels: Bullish above 20 targeting 22-25. Bearish below 20 targeting 18, then 16.
SPX Shows Lots Of GEX 7200-7300, Eventual Tag Of 200-Day?
The good news for bulls is that SPX is getting a little bit extended to the downside relative to the HMA. The bad news is that the HMA at 7403 is now a resistance area that needs to be recaptured, and the GEX picture for the next two weeks (shown to the right/middle of the chart below) shows almost no GEX above 7500. In other words, the GEX picture has shifted more negatively- for now. Back to another positive: Option flow was positive above 7400, so if the overnight bounce holds, may we see a face-ripper to knock out shorts before the next leg lower (or higher, if GEX shifts positively soon). Ultimately, the 200-day moving average will soon be near the lower daily Keltner and the middle weekly Keltner around the 7130-50 zone, and that may be a potential overshoot target to the downside. At least for the next two weeks, most of the GEX is between 7200-7500, so we are near the lower end of the indicated range.
Key levels: Bullish above 7400 targeting 7450, then 7500. Bearish below 7300 targeting 7200.
QQQ May Still Tag 650- Mixed Picture From Earnings So Far
META is currently 40 points lower after hours, a painful move for those already long. MSFT, on the other hand, rallied nicely, bringing several software stocks up alongside it as well. We also see some semiconductor-related stocks like LRCX showing strong after hours moves, so it’s a mixed picture. Importantly from a contrarian standpoint, QQQ’s sharp drop looks like panic selling, so while QQQ looks like a falling knife, GEX at least suggests the 200 MA at 644 and the large GEX cluster at 650 may be a potential reversal area, at least for a short-term bounce. Potential exists to see QQQ retest 700 in a bullish scenario over the next two weeks, though it’s notable that even reaching 700 currently represents a lower high. Bulls want to see the GEX picture shift higher.
Key Levels: Bullish above 660 targeting 680, then 700. Bearish below 660 targeting 645-650.
IWM Nearing A Negative GEX Extreme: Contrarian Signal
While IWM technically closed below 290, the big GEX area we’ve been drawing attention to in our live stream and in the newsletter, IWM GEX is already nearing a negative extreme, a contrarian signal. We do not yet see QQQ and SPX reaching such an extreme, but it’s not clear whether or not each of them will reach an extreme before establishing a strong bounce. IWM does still have potential to drop toward 280, but the seemingly muted potential for downside may contribute toward a run to new highs for IWM while QQQ may be attempting to make a lower high. A drop to 280 may be enough to bring IWM’s net GEX down from -1.6B to an extreme -2B or more, a potential buying signal from that reading.
Key Levels: Bullish above 290, targeting 295, 300. Bearish below 290 with limited downside toward 280.
Join The Discussion
We hope you will join us in Discord this week, where we will share some observations for free. Non-subscribers can join through Community on our homepage. First-time guests get a free 7-day trial of the premium Discord channels, where we talk through what is happening in real time.
Check out our YouTube video tonight, covering SPX, the VIX, IWM, and several software-related names! View the new video by clicking Community at the top of our homepage to find our YouTube channel link.
Join our livestream by clicking the link on our homepage every day around 10:30am ET, and you can replay the most recent one any time before the next one begins.
We now have a live demo on our homepage for those who want to explore the main sections of our website, so we invite non-members to check it out! We hope you’ll join us as members.
Thanks for being part of our community and know that we invite and appreciate your feedback!
The information provided by Geeks of Finance LLC is for educational purposes only and is not intended to be, nor should be construed as, an offer, recommendation or solicitation to buy or sell any security or instrument or to participate in any transaction or activity. Please view our Investment Adviser Disclaimer and Risk Disclosure.
