SPX Ready To Take A Break?
SPX saw a 70-point reversal from the highs intraday, almost tagging 7800. QQQ came close to 729 before reversing and closing below the key 720 area, and QQQ was under pressure after hours due to weak action across a number of names reporting earnings, including WDC and APP that we recently discussed. The VIX is pressing against a low in the 15s, an area only visited a handful of times this year. Let’s look more closely at upside and downside risks as they appear to us after the sharp move higher this week.
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SPX Needs To Lose 7700 To Consider 7550
The chart below shows gross GEX for this OpEx cycle, excluding today’s 0 DTE GEX. We see most GEX concentrated between 7550 and 7850, with 7700 appearing to be a large flip/pivot zone given the large amount of GEX on the positive and negative sides. Today saw positive cumulative net option flow for SPX, though QQQ was negative. We still view the market as too stretched above key moving averages, elevating the risk of a pullback. Price holding at these levels post-rally may cause the moving averages to rise until they cross over SPX’s price, or we could see the two meet in the middle. Regardless of whether or not SPX rallies to 7850-7900 in a straight line from here, we anticipate some downside, and 7750 is currently a resistance area that needs to be overcome to see higher prices.
Key Levels: Bullish above 7750 targeting 7800, then 7850 (barely over 1%). Bearish below 7700 for a retest of 7600-7650, where we’ll watch price action in real-time to decide what we believe is the most likely next step.
QQQ Downside Likely Limited To 700-710
QQQ has a major floor of potential support at 700, thanks to the GEX on both sides. QQQ is now closing in on a retest of the weekly HMA at 713, an area that bulls want to see holding as support for a move toward 740. A loss of 710 can bring 700 quickly, then 680 below. Option flow selected for this week was largely negative today, but notice most of that flow on a net basis was between 710 and 730, potentially indicating chop within a range.
Key levels: Bullish above 720 targeting 740. Bearish below 720 targeting 710, then 700.
Half Of “Mag 7” Has Room To Run
When we look at SPX showing positive GEX up to 8000, the tendency for many is to be skeptical of such a lofty target. But when I realize SPX just made new highs without the help of several huge stocks, including AAPL, GOOG, and TSLA (amongst many others), I have to acknowledge that such a move toward 7900-8000 could easily happen with a few of these names pumping that were left out of the move to highs. I don’t know that 7900 will become a reality (we need to see SPX overtake 7750 first), but we can at least be aware of the risk. GOOG appears to have a shot at retesting highs around 400 as long as it holds 350, in my view. Other Mag 7 names show upside potential too, and we’ll address some of these in coming days.
Key Levels: Bullish above 350 targeting 380, then 400. bearish below 350 targeting 330.
The VIX Shows Early SIgns Of Turning Back Up
The 30-minute chart shows early promise for a reversal back up for the VIX, though the 1-hour and 2-hour charts look like they could go either way, likely requiring a few hours more time before attempting a bounce. The big negative GEX at 16 is our current pivot on the VIX, with 17 and then 20 potentially being a target.
Bullish above 16 targeting 17-20. Bearish below 16 potentially targeting 14-15.
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