Dips, Jumps, And Surprises
Many recent gap ups were immediately faded, and now we have a nice gap down that was bought during Monday’s session. We were happy to see DIA leading the way, something we’ve been presenting as a possibility given that DIA led the way down for indices and showed oversold conditions, and QQQ tagged its lower Keltner channel finally, something else we’ve been wanting to see.
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Another box that got checked off today was the VIX at least getting closer to the 22.95 upper Keltner level we highlighted yesterday, reaching 22 today and then fading. Nothing we’ve seen today assures us that the rebound will continue, but we now will look for the reaction to the rebound today for clues as to what comes next.
Glancing at the VIX chart above, I circled the 17-19 area, with 17.86 representing the Hull moving average. The rejection from VIX 22 today coincided with the market following through to the upside as the day went on. We now want to see what happens if the VIX can make it down to the middle Keltner at 16.87 or (firstly) the Hull at 17.86. These are potential areas where volatility may re-exert itself to the upside as the Keltners are pointing upward and to the right, increasing the upper Keltner level by about 1% today to 23.27. Below 16.87 opens the door to lower levels.
The Dow (DIA) had a fast reversal higher after the open, and encouraging sign for bulls early in the morning. We haven’t seen DIA climb high enough to invalidate the downside, but we did make it to the Hull, closing just below it at 422.96.
DIA is rebounding nicely from not just the lower Keltner channel, but also the lower GEX Dealer Cluster zone, with 425 being the next important hurdle past the Hull and lots of volume at higher strikes. 435 and 440 are both areas of interest to the upside if the bounce continues.
As mentioned earlier, QQQ finally tagged the lower Keltner around 500, bouncing to the halfway point between the lower Keltner and the Hull near 512. Continuation higher may meet initial resistance around the Hull and we’ll want to see what happens at that area.
The biggest concerns for QQQ are that GEX is still negative, and we still see the largest GEX clusters in negative territory. With QQQ up after hours, we may end up surpassing the Hull at 512 and heading toward the zero GEX line around 515.
While we are still '‘wait-and-see” mode with indices, we will continue acting on intraday signals, which helped a lot today in our Discord channels. I’ve also attached the Earnings Whispers earnings calendar to point out that most of the big banks report Wednesday onward, and some semiconductors (TSMC) and UNH. Earnings season most likely kicks into high gear closer to February with the big tech companies, but the banks might especially have an impact on DIA and (to a lesser extent) SPX, with regional financials potentially impacting small caps.
While the 400 and 405 strikes do have representation for this coming Friday’s expiration, the 435 cluster is Furthermore, PPI is reported in the morning and then CPI on Wednesday at 8:30AM, so don’t get lulled into a sleepy state for this OpEx week..We might still see more fireworks ahead.
Econoday.com
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