The Case For A Pullback Grows
The VIX reached new 2026 lows on Friday, yet divergences are building, including the largest net positive GEX reading on the VIX since June 10, with almost as much positive GEX at 20 as we see negative GEX at 14. If I were looking at the GEX picture without seeing the ticker symbol as some sort of quiz, I would say “I’m a buyer.” SPX GEX at 8000 is net negative looking at this OpEx cycle, though GEX indicates a likely range of 7700-7900. This narrow range shows danger of expansion in either direction, in my view. QQQ looks positive for the time being, but SPX’s HMA approaching the upper Keltner channel with price below the HMA may imply that an overall pullback- and thus a QQQ reversal- may be imminent.
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SPX May See Limited Upside In The Near-Term, Heightened Risk Of SHort-Term Pullback
SPX didn’t make a new high Friday, but we also didn’t see weakness below Thursday’s low, so we’re left without a clear view on SPX based strictly on price action. I do view the close below 7800 to favor downside, with a break below 7749 opening the door toward 7650-7700. Price crossed under the HMA Thursday and remains below the line, but the rising HMA is almost flush with the upper Keltner channel. This confluence often means we’ll see consolidation and/or a drop, but before that happens, it’s entirely possible we could see SPX test that area, currently 7851. I would personally prefer a 7600-7670 low before seeing further upside, but as I’ve said before, the market already told me it doesn’t care what I want.
Key Levels: Bullish above 7800 targeting 7851. Bearish below 7749 targeting 7700, then 7670.
QQQ May See 750, Downside Risk To 700 Below 730
Just as we see SPX approaching what may be a potential short-term top (in theory), QQQ looks like it may have some plans to attempt a move toward 750, with 730 being the key to allowing that push higher. Dealer behavior in the upper Dealer Cluster zone from 730 up to 750 may result in a reversal though, as we view the upper dealer cluster as an area where dealers may sell, given the participant dynamics behind large positive GEX clusters. We also saw positive option flow from 730-750 on Friday, though the largest option flow was observed at 714, and that flow was negative. QQQ breaking below 730 opens the door to a possible retest of 700 once (and if) 720 is surpassed. Even if QQQ reaches 750, I am just as cautious as I suggested in discussing SPX, and the VIX only heightens that concern further.
Key Levels: Bullish above 730 targeting 740-750. Bearish below 730 targeting 720, then 700.
IWM Remains Strong, Possibly Aiming For 310 Before 295
IWM closed above the daily HMA and right at the largest net positive GEX cluster at 305. A reversal could begin from here, but we see a lot of positive option activity at 310 as well as enough positive GEX at 310 to consider 310 a possible target. I also like that 310 coincides with the upper Keltner channel, an area I find to often “work” as a general area for consolidation or reversal. IWM looks bullish to me, and any trip back toward the consolidation zone near 290-295 is an area I’m interested in buying.
Key Levels: Bullish above 305 targeting 310. Bearish below 300 targeting 295.
The VIX Shows Highest GEX Since June 10 As The VIX Presses On A String
We saw a fairly significant shift in the VIX away from the huge negative GEX clusters we saw earlier in the week, actually moving to the highest net positive GEX we’ve seen since June 10. I view this as a potential red flag given all of the contrarian signals forming on the VIX, ranging from negative correlations on some days between VIX and VVIX, the VIX crossing above the HMA, the VIX pressing just below a support zone that has held all year, and the lower Keltner channel starting to point upward. We now see a significant positive GEX cluster at the 20 strike as we approach the options expiration for monthly VIX options Wednesday morning. Based on the current GEX structure across the board, we view a dip that would cause a VIX spike toward 20 as a buying opportunity, but we’ll certainly review comprehensive positioning information at that time for context.
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