SPX May Bounce Soon- Will It Last?
Our main focus in the most recent newsletter was the increasing odds of a VIX spike, the importance of the 7700 SPX strike in determining the next move, and QQQ closing below the key 720 GEX level. Friday saw the negative targets fulfilled, with SPX closing 1 point above 7640 as the VIX spiked from the 14s to just over 16. As we look to OpEx, we believe the odds of at least a temporary bounce are fairly positive, though what happens after a bounce higher is less certain.
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SPX Net GEX Has SHifted More Negatively, 7700 Now The More Likely Rebound Target
SPX didn’t stay above 7700 Thursday, tactically flipping our focus to lower targets, with the help of the 0 DTE picture. We highlighted the largest net GEX clusters as of Wednesday’ close: 7800 to the upside, 7640 to the downside. In a near-perfect display, SPX closed at 7641 after losing 7700 earlier in the day, just as GEX advertised. We’re now below the 15 EMA, with the middle Keltner channel at 7598 and the 50 EMA as our next targets in focus. The net GEX picture seems to favor some consolidation around 7600, possibly rebounding from that point toward 7650-7700, though today did see large negative flow below 7500.
7500-7700 Now In Focus Looking at the Next Two Weeks
The GEX picture for the next two weeks is largely focused on 7500-7700, and today’s drop brought SPX to within 6 points of the weekly HMA, an initial line of support bulls want to see held. A potentially short-term bullish setup could include a drop to 7600, then a move up to 7700, leaving a candle wick on the weekly chart and fulfilling the positive net cumulative option flow visible. Continuation below the HMA may lead to a 7550 test.
Key Levels: Bullish above 7650 targeting 7700, then 7750. Bearish below 7650 targeting 7600, then 7550.
OpEx Friday’s Largest Net GEX Clusters Span The Full 200-Point Range
We looked at the GEX range for the next 2 weeks between 7500-7700, but tomorrow’s expirations alone are huge on a relative basis from 7500-7700, which actually isn’t very helpful in narrowing down exactly where SPX will go. We can always react to whichever extreme might be reached first. I do find it interesting that GEX at 7500 expiring tomorrow is positive, which is bullish and might indicate any initial weakness could be bought.
QQQ Looks Like an Interesting Long Opportunity if 700 Holds
QQQ is approaching the 15 EMA at 701.44, and the huge GEX cluster at 700, marking the lower end of our Dealer Cluster zone. QQQ held the HMA at 710.65 today as well, a potentially bullish sign. If QQQ can hold 700, we might have a nice buying opportunity here, with my personal favorite rebound candidates mostly consisting of the Mag 7. Semiconductor charts look like a bit of a mess, and it might be time for software to not be so soft. QQQ GEX points toward 720-730 for immediate upside, with 680 as the most likely next target below 700.
Key Levels: Bullish above 710 targeting 720, then 730. Bearish below 700 targeting 680.
QQQ Largest Net GEX Clusters EXpiring Friday are In Our Buy Zone
QQQ closed today near an extreme negative GEX reading, which is a potentially bullish contrarian signal, and we see the largest GEX clusters between 700-710, indicating limited downside potential from today’s close. Ideally, as a greedy discount shopper, I’ll buy any weakness we might see tomorrow, as long as we stay above 700 (or recover above 700).
The VIX Has Room To Drop To 15, But Before or After a Tag of 17?
The VIX breached 16 today, just one day after touching the 14s. The largest net GEX is negative at 15, but technically, the VIX is holding above the 9 SMA as the HMA rises. Any decline back to 15 may be a buy for volatility, but the close today and the smaller timeframes point to odds of a spike toward 17 first. We will see where we open in the morning and consider the 0 DTE picture as we look for the next move.
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