Resistance Breached..But Not Tech!
Friday had all of the signs of a seemingly inevitable tap of 6000 SPX on the table, starting out strong and showing the 6000 GEX cluster as a big intraday target at times. However, the picture shifted as the day went on, maintaining prior gains since Thursday but showing a shift from 6000 downward intraday, and 6000 shifting to Monday the 25th. As I type this, Sunday’s futures market open shows a solid move to right around 6000 SPX. In today’s YouTube video (click the link to briefly watch), we take a look at SPY, QQQ, IWM, GLD, TSLA, and NFLX.
While Friday saw SPY and SPX open above and close above the Hull Moving Average, and IWM is already to the top of its Keltner channels, QQQ languished, fading slightly from highs and closing below the Hull, a potentially bearish close. Regardless, QQQ’s performance was certainly divergent from SPX, and we mention that on the YouTube video as well. With benefit of futures already having opened, we see QQQ has opened above the Hull, thus increasing the odds of a move toward 518.
Let’s take a brief look at the 3D graph to see if we can draw any conclusions about any likelihood of direction by certain timeframes based on gamma (GEX). We see a considerable amount of positive GEX centered around December 20, with 6055 being the largest cluster for late December. This potentially indicates that market participants do indeed look for higher prices into year-end. We have plenty of time to position for that and make adjustments if needed, but what happens in the immediate next several days/week? The largest GEX cluster between now and December 20 is actually a negative cluster at 490, only about 3% lower. If GEX as we see it now plays out in terms of price action, we may see a pullback soon that gets bought into year end.
QQQ 3D GEX Graph: www.geekoffinance.com
On the positive side, QQQ does show continued improvement in GEX overall, moving more positively most of the last 4 days. Since total GEX doesn’t always fit in with stark, short-term judgment calls of time and price, this GEX positioning can easily fit in with a short-term drop followed by a rally (after SPX hits 6000?).
SPX Historical GEX: www.geeksoffinance.com
SPX has closed in a clearly positive position based on the Hull and also based on GEX, with the Keltners signaling 6024-6025.
SPX continues to also show improved positive GEX, though slowing the last couple of days. The total net GEX of 1.13B is in bullish territory, and not so high that it would serve as a contrarian signal, like we saw Nov 7-9, which pretty much marked the market top so far as well. Plenty of room for GEX to increase before reaching an “extreme” is a positive.
SPX Historical GEX: www.geeksoffinance.com
SPX is on the edge of the G1 Dealer Cluster Zone, where we expect dealers to be potential sellers, or at least consolidation for awhile, but price can extend all the way up close to 6100 before breaching that red box. 6055 is a big cluster for December 20, and as mentioned earlier, Friday’s 6000 GEX shifted to Monday, so being clear of the Hull resistance and having the backdrop of a strong GEX picture makes any short entry at least somewhat premature. We also have a lot more GEX interest above 6000 than below, as shown by the purple horizontal bars. Let’s see what happens as we enter the cash session tomorrow.
One observation that we’ve seen more than once in recent days is really high option volume at SPX 5000. We don’t see a lot of GEX, but the option volume has been there. Is it hedging against longs? A wise crash bet? Part of a JPM-style hedge trade? We don’t know, but tagging the G1 box is a good reason to be nimble just in case we go for the deep dive (we don’t think it’s statistically very probable, but it’s good to be prepared).
SPX GEX Levels: www.geeksoffinance.com
With Thursday being a holiday and Friday a half-day, we’ll have a shortened week, but we will still be here every day. Join the conversation in Discord tomorrow and we’ll report what we’re seeing as the data unfolds!
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