SPX May See More Volatility Ahead
We skipped the usual Sunday night newsletter since markets were closed on Monday in the USA, but Tuesday will see a resumption of the centrally planned circus we still call the “stock market,” so let’s jump into our Survival Guide for Turnaround (turnaround from what- sideways?) Tuesday. We’ve noted unusual VIX divergences, and sure enough, the VIX was indeed green on Friday, after making a new yearly low premarket below 14. SPX GEX indicates limited upside and some potential downside targets looking toward September OpEx, and we just might see both extremes hit. The VIX suggests risk to the upside for volatility, yet a VIX spike has considerable headwinds as well, so we’ll look at the full picture in tonight’s newsletter.
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GEX Data Suggests SPX is Likely to Tag 7800-7825 This Week, DOwnside Risk Looms
Looking at price action itself, SPX made a new low last week (since the big rally concluding in early August), but SPX did not make a new high. That single data point looks bearish, but SPX continues maintaining above key indicators on my chart, including the HMA and the 9 SMA. We also see 7825 standing out as the largest net positive GEX cluster expiring this Friday. GEX dies off after 7900 this week, so Friday’s closing picture seems to suggest limited upside toward 7900 (+2% roughly), whether before or after the possibility of a fade (-2% to -4%), unless the picture changes dramatically. On the downside, the gross picture suggests 7600 is likely if 7682 is lost, then 7550-7500.
SPX Net GEX Into OpEx Brings up the Obnoxious 8000 Target- Get Ready!
Sometimes the gross GEX view paints a different picture compared to the net GEX view, so let’s look at the largest net GEX clusters, extending our evaluation to OpEx (September 18) instead of just this week: Incredibly, as you see below, 8000 is the largest net GEX target. This observation has shaken up my own internal biases that have been formed by data points in the days before today, and it’s entirely possible we see either a top by 9/18 for the entire year, or we will see GEX adjust even higher.
In summary, we are speculatively looking for some minor weakness as this week progresses, but we may see SPX reach 8000 by 9/18.
Key Levels: Bullish above 7700 targeting 7800, 7825 this week. Bearish below 7700 targeting 7650, 7600.
IWM Needs Above 297 to Trigger a More Bullish Move
IWM closed above the daily HMA, which is a positive, yet IWM remains below 296.70, the daily 9 SMA. Looking back, the close above the 9 SMA is what ignited follow through to the upside, so bulls may want to see 297 exceeded to improve the odds of 300-310 test. Below 295, IWM risks a test of 290, potentially down to 280.
Key Levels: Bullish above 297 targeting 300-310, bearish below 295 targeting 290, 285.
QQQ Appears to be the Most Confused Index- Still Biased Higher (for now)
QQQ is performing well in Monday night’s futures, and the GEX picture points toward 730-740 as long as QQQ holds above 720. Below 720 and QQQ may target 710, then 700, then 685.
Key Levels: Bullish above 720 targeting 730-740, bearish below 710 targeting 700, then 685.
The VIX Just Won’t Die
The most glaring VIX divergence recently isn’t so much from the movement of the VIX, though Friday’s rebound from the sub-14s to a positive .24 on the day was still noteworthy, but was instead from the persistently high positive GEX we see. Even Friday’s GEX close was only slightly lower than Thursday’s for the VIX. From all appearances, downside for the VIX is limited going forward, even if a big upside volatility spike waits until OpEx is completed. We’ll be monitoring any minor spikes that occur this week toward 16-17 as we look for confirmation regarding SPX’s likelihood of tagging 8000 in less than 2 weeks.
Key Levels: Bullish (for the VIX) above 16 targeting 18-20, bearish below 15 targeting 14.
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