SPX 7700 Holding- What’s Next?
SPX declined to just below 7700 intraday, technically fulfilling the VIX divergences and other factors we’ve highlighted over the last 2 days. The VIX spike was weak, and we may see sub-14 levels for the VIX soon. However, QQQ may have “unfinished business” on the downside, implying the VIX may not be done quite yet, so we want to cover several possible scenarios looking ahead.
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SPX Targeting 7800 as Long as 7700 Test Holds
SPX briefly dipped to the 7695 area today before rebounding above 7700. GEX shows 7700 to be an important pivot, and holding above 7700 brings 7750, 7800, and 7900 into focus as potential upside targets, in our view. Today saw positive net option flow at 7800 and 7900 strikes as well. We remain open to the possibility of a move down to 7660-7675 before heading to 7750-7800, though a move toward 7750 immediately may see rejection and a lower low around 7660, also closing the gap from 4 days ago.
Scenario 1: Move up to 7750-7800, rejection, consolidation between 7700-7800 before moving toward 8000.
Scenario 2: Tag 7660-7675 Thursday, then move toward 7750-7800, reassess potential downside risk toward 7600.
Scenario 3: Move up to 7800, retest 7750, tag 7900.
Key Levels: Bullish above 7700 targeting 7750-7800. Bearish below 7700 targeting 7660-75, then 7600.
QQQ Looks Unfinished to the Downside- 730 Test Incoming (After or Before a Bounce)?
QQQ didn’t participate as much in today’s pullback, barely dropping, while SPX almost gave the entire green candle from Monday (though not the gap up itself). A bullish argument may focus on strength: QQQ is outperforming thanks to the AI trade. The less optimistic view is that QQQ may see lower levels tested first, potentially between 720-730. 740 appears to be the current GEX pivot, targeting 730-735 below, while targeting 745-755 above 740, initially.
Scenario 1: QQQ tests 745-750, potentially reaching 755 by Friday, then we see choppy action potentially toward 730.
Scenario 2: Retest 730, then move higher toward 750.
Scenario 3: 740 becomes resistance, QQQ tests 730, eventually working its way lower toward 710.
Key Levels: Bullish above 740 targeting 745, 750. Bearish below 740 targeting 735, 730.
IWM Approaches Interesting Contrarian Zone 275-280
IWM net GEX moved more negative Wednesday, and price action looks weak. GEX points to 280, then potentially 275 as targets. I underlined prior local lows that bottomed at or near the weekly 50 EMA. If this decline stops at a similar area, the GEX at 275 is certainly a realistic target. The weekly chart still looks bullish, though IWM needs to contend with the HMA resistance just above 293.
Scenario 1: IWM tags 280, bounces to tag the 290-293 zone, potentially choppy thereafter for some time.
Scenario 2: IWM drops to 272-275, bounces to 290, then we reassess.
Scenario 3: IWM drops down toward 265 before a larger reversal targeting new highs into year-end.
Key Levels: Bullish above 285 targeting 290-295. Bearish below 280 targeting 275, 270.
VIX Fulfilled Initial Anticipated Bounce, GEX Still Positive
We’ve noted the glaring divergence of VIX net GEX compared to VIX action lately, and while we didn’t see a big spike in the VIX, 6.3% is enough to consider those signals fulfilled. The weak bounce tested the cluster of moving averages near 15.5, closing just below. The next day or two will reveal whether the VIX is destined to head toward 20 immediately or head back toward lows. We see a mixed picture across various timeframes, so Thursday may be key in giving some initial clues. We’ll also watch the large negative GEX at the 15 strikes for shifts up or down that may accompany or precede VIX movement in either direction.
Key Levels: Bullish (for volatility) above 15.75 targeting 17, then 20. Limited downside below 15 targeting 13.5-14.
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