SPX may Close out Q3 on an Up Note
Our “scenario 1” from last night’s newsletter pretty much played out today, with the intraday low almost touching the 7650 target before rebounding. The VIX made a lower high compared to yesterday and IWM is very close to the large GEX strike at 275, an area of potential interest for a rebound. Seeing the market bounce on the last day of the month will not be a surprise, but will such a bounce have staying power? Tonight we’re going to primarily focus on key weekly levels for the major indices, since GEX appears to be lining up with some of the weekly chart indicators on my chart.
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Initial Rebound Toward SPX 7700-7710 in Focus as long as 7600 Holds
Glancing at the weekly chart below, you can see that SPX has been stuck below the weekly HMA for 3 complete weeks, with this week being the 4th in progress. Approaching the largest net positive GEX cluster at 8000 (not obvious on the GEX bars because I have only this week selected) will require a solid conquering of 7755, the HMA and a level 5 points above a large GEX cluster. SPX is also below the 9 SMA at 7707.67, so SPX has some work to do to flip the script. As it stands now, failure to overtake 7708 will likely target 7600, a mere 2.64 points above the 15 EMA. But sometimes, the market doesn’t move in a straight line, and the close above 7650 brings 7700-7710 back into focus, a retest of the weekly 9 SMA.
-Primary scenario: SPX rallies for the last day of Q3, potentially reaching 7700-7710, then drops toward 7600.
-Alternate pathway: SPX gaps down Wednesday with a tag of 7600-7625, then rallies back to 7650-7675.
Key Levels: Bullish above 7675 targeting 7700-7710. Bearish below 7650 targeting 7600.
QQQ may Rally to 745-750 to Retest Weekly HMA
QQQ continues to be resilient thanks to the “story stocks on steroids” theme we see with the A.I. stocks, not even breaking the weekly 9 SMA and c losing above that level. GEX appears to indicate limited upside at this point, and futures show ES outperforming NQ, which fits the GEX data point. Nonetheless, QQQ still has upside to retest its own weekly HMA around 745-750, and odds also seem to favor a rally first, and then a potential drop back to 730 or lower.
-Primary Scenario: QQQ rallies to 745, then fades back toward 730.
-Alternate Scenario: QQQ gaps down and tests 725-730, then rallies to 740-745.
Key Levels: Bullish above 740 targeting 745, 750. Bearish below 730 targeting 725.
IWM Approaches the Weekly 50 EMA, Imminent Bounce may Target 285
IWM is inching closer to a retest of the 50 EMA, currently at 272.28. GEX at 275 is larger, so perhaps this drop stops a little higher than the 50 EMA. A rebound may target a retest of 290, right at the declining HMA, but GEX for this week is virtually nonexistent above 290. 285 even appears to be a higher likelihood target based on being the largest GEX cluster above 280.
-Primary Scenario: IWM tags 275, then rallies to 285-290.
-Secondary Scenario: IWM gaps below 275, continues down to 265-270.
Key Levels: Bullish above 280 targeting 285-290. Bearish below 272 targeting 265, 260.
The VIX Prints 2nd Day of Negative net GEX, Lower Timeframes Suggest Retest of 15
The VIX did drop today, which was our primary scenario last night, but the drop was pathetic, stopping at 15.77 and bouncing. Market bulls will want to see the VIX deflate a bit more in order to give indices more breathing room to the upside. GEX did stay in negative territory, which may be a sign that a market relief bounce is due. GEX and the daily/weekly HMAs all support the idea of a drop to 15, then a rebound in the VIX, potentially toward 20.
-Primary Scenario: drop toward 15, then move toward 20.
Secondary Scenario: The VIX spikes toward 20, then drops toward 13-14 into year end.
Key Levels: Bullish above 17 targeting 20. Bearish below 16 targeting 15, then 14.
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