With monthly option expiration (OpEx) behind us, we saw a lot of negative gamma (GEX) roll off Friday, which we highlighted Sunday. Negative GEX rolling off in combination with positioning shifts today saw a huge increase in positive GEX, swinging SPY and QQQ from a relative low point to positive levels seen at least as far back as October. I notice QQQ saw the biggest swing from negative to positive that we’ve seen recently, all before NVDA reports this week. Bears, be careful! We take a look at a few other tickers in today’s YouTube video, ranging from SPY to the VIX to NFLX and AAPL, so give it a quick view for some additional context.

Before we delve into GEX and charts, let’s take a brief glance at this weeks’ earnings reports of consequence. We have WMT and LOW premarket tomorrow, which will impact the retail sector and the Dow. LOW has positive GEX and shows big GEX at 300, so we’ll see what happens with that. WMT shows positive GEX as well, with GEX targets at 85 and 87 to the positive side.

We also see TGT on Wednesday before the market opens, but it’s NVDA that will potentially be a mover and shaker for QQQ and SPY, and with VIX expiration completed by that point, it’s at least possible that the market may be more “free” to move dramatically, since all of those VIX options from the prior month will have expired. It’s at least something conceptually to think about as we approach Wednesday.

We’ll skip SPY and SPX today, because we cover SPY in the YouTube video, plus QQQ presents as clear or a more clear picture for today, at least in my subjective opinion. When tomorrow’s market opens, we’ll look at SPY and SPX again, and the odds are that we’ll see some useful information at that time (hop into our Discord if you haven’t already). QQQ bounced off of the middle Keltner channel, closing above the channel, which presents a conflicting bullish signal relative to being below the Hull Moving Average. But is it “conflicting?” Perhaps not, if we consider the timeframe difference that might be involved, and also the distance below the Hull, which is relatively unusual. Price dropped so fast on Friday that the Hull has barely had a chance to respond. When I see that large of a disparity, I have to start wondering if perhaps we need to see the two meet again, which might be some combination of the Hull declining while QQQ makes its way higher to close that gap?

QQQ had had incredible rebound in terms of GEX, swinging from a depressing -1B to positive 440M in a day. Ah, the magic of OpEx and Ken Griffin’s call premium evaporation machine.

QQQ Historical GEX Levels: www.geeksoffinance.com

Another thing that stood out to me today is that QQQ’s entire GEX structure has shifted upward at the moment, with 520 now the upper dealer cluster, where dealers may become sellers, and 480-485 for the lower dealer cluster, where dealers may become buyers. Of course, despite that, QQQ is very close to the zero GEX line, leaving open the possibility that either side is chosen first, with the upper zone being a little closer in terms of distance to target.

With the VIX option expiration approaching, I said we would alert to any significant changes in the VIX GEX picture, but we haven’t seen any significant changes. That said, sorry, I’m talking about it anyway tonight, mostly to emphasize nuances that I think are worth watching.

While I share the daily Keltner chart below, the 2 hour and 4 hour Keltners are all fairly close in alignment as far as the lower target goes: The Hull is between 13-13.54. Amazingly, this implies (according to my personal rules) that the VIX can make a new incremental low and still technically be bullish for volatility. I don’t know if we see another attempt higher for the VIX (potentially lower for the market) first, but I’d expect any rally in volatility to meet resistance aroun 18 and then potentially aim for those lower targets. It’s also possible that the lower target is hit first, and we haven’t reviewed anything to sway our view one way or another (yet).

The VIX GEX levels chart looks like the VIX is really close to a zone where dealers are likely to step up as buyers of volatility. This is largely due to the massive negative GEX positioning at 15. As I said before the spike on Friday, do we expect the VIX to drop below 15 and make all of those short sellers on the VIX rich? Do we have any XIV 2018 alums in the mix (look if you want to learn about a spectacular blow up)? I think it’s more realistic to expect a close just below or just above 15, or even higher around 18, just to see a lot of premium expire worthless. 18 seems far away, and yes, that would involve some pain for market bulls..But it’s only one of several possibilities.

The 3D graph shows how one-sided the VIX GEX positioning is right now, it’s quite extreme, which can be more of a contrarian signal. We do see some negative GEX at 14, but most of it is between 15-18, so we at least have the range of highest probability for the next couple of days.

So we have: Bullish shift in QQQ and unfilled gaps, and a potentially bullish (for volatility) setup in VIX..Seems like we need a little more clarity, but not so much that we see it having happened in hindsight. We also had a “suspiciously” bearish NVDA headline today, almost as though they’re priming the pump to squeeze bears by Wednesday’s close after hours. Short-term low for the market Wednesday? NVDA 150 GEX sticks out like a sore thumb….We’ll take it day by day and we hope you’ll join the conversation in Discord tomorrow where we’ll be sure to share any conclusions regarding shifts in the odds of one outcome or the other, and we have some great participants also sharing what they see. We’d love to have you with us!

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VIX Expiration & NVDA Ahead

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VIX Expiration & NVDA Ahead

Change is Imminent

There It Is….

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