Divergent Views Between SPX and QQQ?
Two conflicting GEX pictures and charts between SPX and QQQ create a foggy picture in the short term, particularly when coupled with a VIX that is at the same low level that it was at in June, unable to break down below 14 (so far). SPX shows net GEX mostly lower over the next two weeks, while QQQ is looking solid above 700, I guess the game of musical chairs between SMH and software is set to create a virtuous loop of wealth creation. Right?
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VIX Consolidates Further, But Once Again Starts Out Above Weekly HMA
In last night’s newsletter, we identified a bullish move to 17-20 as being possible above 15.3 for the VIX. Monday’s high was 15.5, followed by a rejection back to sub-15, so I think we identified the correct bull/bear line in the sand. Even with the fade intraday, we still saw the VIX close almost 4% higher than Friday’s close, and the VIX is once again above the weekly HMA. We started out above the HMA last week, but by Friday, the close occurred below the line, negating any bullish momentum for volatility. If you look at past events, the first week showing the VIX closing above the HMA (after being below the HMA in prior weeks) is often met with at least a week of follow-through to the upside, so we will see if this week ends up being a repeat of last week or the beginning of a larger market pullback.
Key Levels: Bullish (for the VIX) above 15.16 targeting 17-18, then 20. Bearish below 14.6 targeting 14.
SPX Still Holds HMA Support on the Daily Chart, GEX Neutral
The daily chart of SPX shows all of the key levels holding so far, with the intraday low touching the middle Keltner channel and closing above the HMA. We saw SPX touch 7665, five points below the 7670 level we discussed as a first target. So far, so good: SPX is holding the initial test of key levels we’ve identified. The gross GEX picture shown below brings attention to the big 7700 area that we’ve been watching for weeks as an important support/resistance area, which is now an important resistance point for bears. A move above 7700 brings 7750 and 7800 back into focus.
Weekly SPX Picture Looks More Concerning, Net GEX Clearly Biased Lower
Unfortunately, the net GEX picture for SPX over the next two weeks (excluding today’s 0 DTE GEX, which is no longer relevant) looks more concerning. While total GEX is still slightly net positive (we would consider the current 214M reading as “neutral”), SPX clearly shows 7550 and 7600 as the two largest net GEX clusters other than at 7680. We also see SPX closing below the weekly HMA at 7707. These factors do contribute toward improving odds of a move lower toward 7650 and 7600, but only if we see SPX stay below the HMA and the large positive and negative gross GEX at 7700. Looking beyond the next two weeks, SPX still looks bullish, targeting 7900-8000, so our fretting about the next few days may ultimately resolve higher later, if not sooner.
Key Levels: Bearish below 7680 targeting 7650, 7600. Bullish above 7708 targeting 7750, 7800.
QQQ Looks More Bullish Than SPX on a Weekly Basis
QQQ has seemingly benefited from the awakening of the software sector, given the Mag 7 a rest from complete reliance as well as the semiconductors. Can the virtuous rotation amongst the largest QQQ components continue, or will QQQ ultimately follow SPX down the drain in a bearish scenario? QQQ is still above the HMA at 711.94 and the 9 SMA, we still see large GEX at 700 and 705, and we see positive net GEX up to 735 that appear to be the odds-favorite targets. We don’t know the future, but we can tactically confirm that we won’t be looking for 680 unless 700 is lost on a daily close, so we’ll plan on reacting to the next move as opposed to attemping a wild guess. A move beyond 720 may accelerate toward 735. We’ll be posting intraday observations in Discord as we navigate the day-to-day moves afforded by the 0 DTE GEX picture and option flow. We hope you’ll join us!
Key Levels: Bullish above 705 targeting 20-735. Bearish below 700 targeting 680.
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