VIX Still in Positive GEX- Red Flag?
Indices gapped up today, failing to close above the most bullish pivot point we mentioned yesterday (SPX 7640) but holding onto most of the gains, which looks positive. IWM was the exception. The VIX was crushed -12% yet GEX remains positive for the VIX, potentially signaling another round of our favorite VIX game “Too Far, Too Fast” to the downside. GEX for the next two weeks suggests 7700 is a solid upside target, and I wouldn’t be surprised if we hit it tomorrow. Let’s look more closely at the full picture.
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SPX Still Below 7640, but GEX Points Toward Possible Move to 7700
The 1-hour chart for SPX shows price consolidating after the gap up as the HMA is rising. The GEX picture for the next two weeks highlights the importance of 7600-7650 as a chop zone with a daily close on either side of the line (or perhaps a gap beyond the line to start the day) likely determining whether we see 7700 first or a retest as low as 7550. It’s possible we can see both sides in coming days, depending on how the GEX picture shifts upon tagging the first target on either side of 7600-7650.
Key Levels: Bullish above 7650 targeting 7700. Bearish below 7600 targeting 7550, 7500.
QQQ 1-Hour Chart Leans Toward a Pullback soon- Maybe 720 Comes First
QQQ is now looking less bullish than SPX in the very short run, though overall, QQQ has recently performed better than SPX. QQQ net GEX shows limited upside toward 720-725 while the downside targets span down to 690 and lower. Tactically, QQQ needs to lose 710 to consider a retest of 700. Flow was positive today and GEX swung from negative to positive very quickly, so we remain in this same channel we’ve seen for weeks.
Key Levels: Bullish above 715 targeting 720-725. Bearish below 715 targeting 710, then 700.
IWM Net GEX: Extreme and Getting More Extreme
IWM’s negative net GEX at the day’s close is considered extreme below -2B when compared to prior readings over the past 52-weeks, and we’ve had several progressively larger negative readings this week. Such negative readings have usually marked bottoms, but is this time different? It’s possible, but we see positive flows today while IWM is just above the lower Dealer Cluster zone, the largest net negative GEX area where dealers may become buyers. Even if IWM pushes lower from here, the risk/reward doesn’t look appealing for shorts in our view, and 280 seems to be a potential floor.
Key Levels: Bullish above 289 targeting 295, 300. Bearish below 285 targeting 280.
VIX Positive GEX Virtually Unchanged Despite -12% Day
The VIX gave up a lot of ground today, gapping down, then failing at the 9 SMA retest. Market bulls already have a potential problem though. The VIX is back in this 14-15.5 area that has pretty much held all year. We also see stubborn positive GEX despite the -12% day. Lower timeframes are oversold as well, so we may end up seeing at least a retest of 17 in coming days, with a more bearish scenario seeing VIX 20 reached.
Key Levels: 20 is possible above 17, 16.16 is the first step. Below 16 should see the VIX test 15.
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