Out Of The Woods?
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Oftentimes we are dealing with mixed signals, which makes sense, because if everything played out according to frequently clear signals, everyone would be rich, and you probably wouldn’t be reading this newsletter (I don’t give myself credit for being very entertaining either) or subscribing to receive our data. Despite today’s impressive gap up, we are still left with mixed signals. We do need to clarify that context (especially regarding timeframe) is very important. What we’re seeing may be high conviction bullish intermediate term, but indecisive or even bearish very short term.
This brings us to today’s market, where QQQ appears to be the most bullish of the indices, SPX maintained its gap up while actually closing down for the cash session, and DIA as well as IWM closed down or flat relative to Friday’s close. Ouch. Let’s not forget the VIX, which was essentially flat despite the big gap up. Something doesn’t add up, right? This is where timeframe comes into play. We may be due for repairing some weak structure on the way up since Friday, perhaps filling some gaps, but gamma (GEX) has moved into more positive territory, and we now have to view some prior resistance points as potential support with any such backtest. We cover a market overview and comparison of indices in today’s YouTube video, which you can access by clicking here.
The chart above shows SPX, which (as expected) breached the middle Keltner channel but then saw fairly intense selling back below the Keltner. Will we see a gap fill tomorrow? The Hull moving average is at 5914, so as long as we’re above that line, I’m inclined to lean toward the long side, GEX included. So perhaps a backtest this week (if one occurs) may represent a buying opportunity heading into OpEx January 17.
The GEX Levels chart shows below shows an impressive upper Dealer Cluster zone from 6200-6300, which has moved up from anything we saw in 2024, and our lower zone ranges from 5800-5900. This GEX structure certainly seems to be an improvement from days past, and adds to the general notion that dips may prove to be buying opportunities.
A shorter term note of caution, despite the bullish signs we’ve pointed out, is that recent GEX highs just above this area have marked short-term tops. Note that price rebounds were experienced after each of those tops, despite reaching lower highs, so the short term picture has been dynamic with buy/sell opportunities marked by changes in GEX when combined with other factors. The current closing GEX of 910M is just under our 1B neutral/bullish border number.
As mentioned initially, QQQ looks to be the most bullish, closing above the middle Keltner channel and maintaining a higher close than today’s cash session open, the only index to do so. Given that it’s the only one, and represents a less diverse yet important set of industries (technology), I give a slight edge toward SPX’s signals while watching how 516 QQQ is handled on any downturn.
Lastly, let’s turn our attention to divergences amongst the indices, with DIA maintaining positive GEX yet looking very weak (on the surface) relative to QQQ. We saw DIA’s close 0.03 below Friday’s close, because hey, Gordon G. has a sense of humor. What I don’t like is the fact that the Keltner channels are pointing downward and to the right (not that they’d point downward and to the left, which would take us back in time), signaling a downtrend that may require substantial effort to change to an uptrend. But DIA has still been consolidating in potentially constructive fashion with similar daily candles relative to SPX. as long as 425 is maintained, the upside rebound (even if a temporary countertrend) appears to be intact.
To add to the bullish picture, and perhaps more substantively than theoretical chart indicators, we see GEX showing positioning is bullish toward 440 as long as 420-425 holds. I still like 425 as a benchmark because of the relative size of the GEX cluster at that level. We also saw big volume today at 435, which is also represented by a fairly significant GEX cluster. With the middle Keltner channel just over 436 and the G1 Dealer Cluster at 440, 435-440 seems to be fairly high probability for DIA.
Our GEX data graph shows the significance of 425 on the negative side (where dealers may become buyers, covering shorts) and 440 on the positive side (where dealers may become sellers). Most of that 440 GEX is concentrated on the January 17 expiration.
One variable to consider in the near future is that we’re approaching earnings season, though this week we don’t see too many companies deemed significant for the broader indices (there are a couple). We’ll account for earnings season as we look ahead, but for now, we’ll rely upon our charts and GEX to guide our decisions. Join us tomorrow in Discord as we look for good setups intraday and share some market analysis.
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