SPX Tests 7500, Not yet out of the Woods
Bulls failed to deliver following the FOMC announcement today, sending the VIX almost to 19 as SPX dropped nearly to 7500, fulfilling the downside target advertised by the 7500-7700 GEX picture we’ve been highlighting. The subsequent bounce was a big one, with SPX closing at 7552. The VIX can still reach 20 as long as it holds above 17, and SPX has a lot of resistance at 7600 (relative to other GEX clusters), so bulls have some work to do to avoid a permanent staycation at the steakhouse.
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The VIX Maintains Risk to 20, Needs Below 17 to See Higher SPX
The VIX zero gamma line is at 18, close to the 200-day moving average and a large GEX area that appears to be an important pivot for volatility and the market. Today’s high near 19 didn’t quite make it to 20, for those familiar with counting, and it’s unclear whether or not we will see further upside toward 20+ or if the move is over. Closing below VIX 17 is the first potential signal that the doom & gloom may be over, in my opinion, with a close below 16 potentially bringing 14-15 back into focus (doom & gloom for bears only).
Key Levels: Bullish (for the VIX) above 18 targeting 20-22. Bearish below 17 targeting 16, then 15.
QQQ Makes “Cheesy” Low at 700 Exactly, Net GEX Still Focused Lower
As a kid, I would be hunting for TV shows on my grandparents hi-tech cable TV (I know, some of you are thinking “what a young whippersnapper!”) and I would come across The 700-Club, apparently a religious show that always seemed to occupy one station. I always skipped over it, but it’s hard to skip over the importance of 700 to QQQ, which held to the penny today before staging a weak bounce to 704.75. Net GEX this week (as shown below) still favors lower strikes down to 685, but only if 700 is lost. I’ve underlined 710 because the gross GEX picture shows a large ceiling at 710, also fairly close to the HMA at 710.89 and the 9 SMA at 711.69, so GEX and my indicators align to signify the importance of 710 as a pivot point.
Key Levels: Bullish above 710 targeting 720. Bearish below 700 targeting 690, 685.
SPX Closes at Weekly 9 SMA, Net GEX Picture Looks SUpportive of Rebound
Looking at the net GEX picture for Thursday and Friday, we see the 7500-7700 range we’ve previously discussed still in focus, and today we tagged 7500. We’ll look at 7600 more closely in the next paragraph, but reaching 7700 may face some challenges. It’s worth noting that today’s close was 5 pennies from the weekly 9 SMA, which has stopped every decline since the Spring lows, and 7640 really needs to be recaptured to paint a more bullish picture.
SPX Daily Chart & Gross GEX Shows 7600 as a Large Area of Resistance
Let’s zoom in to the daily chart for SPX before drawing any conclusions about the rest of the week. The gross GEX picture shows more GEX between 7450 and 7600 than we see between 7500 and 7650, which looks more bearish than the net GEX picture we just reviewed. 7600 appears as a huge ceiling. Bulls want to see a daily close above 7600 Thursday to improve the odds that we actually see a shift in GEX toward 7700+. The HMA is at 7614 and the 9 SMA is at 7640, so we have a number of hurdles between 7600-7640 that may be met with a reversal back down. The lower daily Keltner channel is at 7421, roughly 2% from here, so don’t write off the possibility that today ended the downtrend we’ve seen over the last month.
Key Levels: Bullish above 7600 targeting 7650, 7700. Bearish below 7600 targeting 7500, 7450.
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