One More Pump?
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We didn’t get a chance to record a YouTube video tonight, but to briefly revisit some of yesterday’s ideas (you can view the video here), UNH, GOOG, GLD, and IWM were all up nicely for at least part of today, with some of those ideas showing most or all of their gains after the cash open. With big tech earnings this week, trading can be akin to the difficult conditions experienced during OpEx week, but gamma (GEX) still allows us to find higher probability directional plays like we just highlighted. For the broader indices, it has been a difficult chopfest, with premium kill taking hold at certain parts of the day, and a day-by-day up and then down pattern driving the post-2020 pajama pentamillionaires mad.
QQQ is a great example of this: Nicely holding key levels, like the Hull Moving Average shown just below today’s candle, yet painting an alternating color (green, red, green, red) just to mess with you. My bottom line is that as long as the Hull holds at 495.86, the bias is toward the upper Keltner, now at 509.09, with a large GEX cluster at 510.
I’m not a fan of beating dead horses, or even live horses, but the most concerning aspect of QQQ is that we’re already in the red Dealer Cluster Zone, and so far, we’ve rejected the lower levels. On the other hoof, I mean- hand, that same zone still shows 510 as a potential target. Logically speaking, with a rejection from the red box happening while my Hull is slightly below, I will defer to the Hull as the next line-in-the-sand with which to make the next decision. If we decisively breach it, or close below it, I will start looking lower.
QQQ GEX Levels: www.geeksoffinance.com
I present to you a few 3D GEX clusters that have my attention on QQQ over the coming days: Firstly, the largest single cluster (outside of today’s 0 DTE GEX, which is gone early in the morning) is a negative cluster at 485 expiring November 1st. If this cluster ends up holding and dominating action over the next two days, we may see QQQ continue its decline.
QQQ 3D GEX: www.geeksoffinance.com
But check yourself before you wreck yourself, we have two positive clusters that are independently smaller at 21.5M-25M at the 500 strike, yet combined, they exceed the size of the -34.9M negative cluster at 485. The positioning this week does raise a question: When we see tomorrow’s 21.5M roll off at 500, leaving a sizable yet smaller cluster at 500 for Friday, will the magnet then become 485 to the downside? The answer to this question is very speculative, and I’m not sure. I have a slight lean toward tomorrow having greater odds of being positive than Friday, counterintuitively, factoring in 1)the recent tendency this week of alternating green/red days this week, and 2) the greatest current positive GEX existing for tomorrow and not Friday (though that can change).
QQQ 3D GEX: www.geeksoffinance.com
As for the VIX, the chart continues indicating higher potential levels, with 21 marking the approximate upper Keltner at this point, and the channel is sloping up. If we see the upside scenario play out tomorrow (even if the market gaps down initially), we may see the VIX touch 21 and then fade back to 19 or even 18.
Part of my skepticism in the VIX short term stems from GEX positioning in VIX options, which still points toward volatility being kept in check and lots of option volume at 17 and 15 strikes today. To give a counterpoint to my observations, the last day we saw a big volume spike at VIX 13, the next day we saw the VIX spike higher. Take note, the VIX is a wild animal and not subject to nice, black-and-white rules that work 100% of the time. Especially during a week of important earnings reports and just before a major election.
VIX GEX Levels: www.geeksoffinance.com
IWM fulfilled two of the proposed possibilities today: 1) rising while QQQ fell, and 2) holding the Hull and the trendline drawn, continuing to justify expectations for a possible larger upside move. To simplify, 230 remains a target above 221, below 221 opens the door to 211, and IWM may not move perfectly in tandem with the tech-heavy QQQ and SPY.
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