Setting The Stage For Year-End 2024
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Friday was one of those days (not quite as common over the last week or so as we endured Big Tech earnings) where zero DTE gamma (GEX) gave me a very comfortable setup that I considered high probability. In Discord, we were able to identify the possible setup early in the morning, and most importantly, in advance of the move happening. Here’s what was said:
The low of the day for QQQ was 485.2, and SPX reached 5723. Smells like victory. Importantly, the GEX picture was quite contrary to early technical signs that may have excited some bulls into thinking “breakout!” At the end of the day, actual market positioning (our focus being GEX) is concrete data, but chart indicators are strictly theoretical. I always appreciate indicators confirming what I see with market positioning, but when the two collide, I will always choose positioning in terms of prioritization (though not exclusively).
Portfolio Manager subscribers can find our latest Strategy Session on Discord today, but we also posted a 10-minute YouTube video available to everyone, covering a number of topics and ideas not necessarily included in tonight’s newsletter, so check it out if you get a chance by clicking here.
This week brings with it a number of market uncertainties, ranging from the reaction to the election,\ to PMI data to a Fed interest rate decision Thursday (delayed a day due to election results, apparently). Regardless of party, it would seem that certainty would be preferred to uncertainty, so a clear victor Tuesday night may result in a deflating of volatility as demonstrated by the VIX in similar past instances. This would mean the market can rise if we know who the President is by Tuesday night. Does this impact the Fed’s rate decision? In theory, it shouldn’t, so we’ll see if the reasoning given for their decision will be coherent or not before passing judgment. And the Fed’s decision can certainly add or detract from the starting direction on Tuesday/Wednesday. So there are plenty of reasons to watch GEX closely this week to improve your odds of being on the right side.
SPX stopped right at the 9-day SMA as shown below:
SPX chart:Thinkorswim mobile
SPX GEX is still negative, but it has improved slightly as of Friday, still neutral overall. This neutral positioning (leaning negative) is not very helpful for those looking for clear direction, but at least caution can be rightfully encouraged when we see such uncertainty.
SPX historical GEX Levels: www.geeksoffinance.com
SPX positioning shown on the GEX Levels chart indicates SPX has reached the upper zone of the lower Dealer Cluster where we may expect a sizable rebound. This is interesting, given that the election is Tuesday. Will we see a quick spike upward and reversal late Tuesday, or the opposite? Hopefully we’ll get further clues Monday.
SPX GEX Levels Chart: www.geeksoffinance.com
Briefly looking at AAPL, one of the largest components in the SPY and/or QQQ, shows another possible reason to look at a potential rebound: AAPL has had 3 sharply down days, with the Keltner channels pointing to 219 or so on the downside at 241 on the upside.
According to GEX, 250 is a potential target, quite some distance above the current zero gamma zone. GEX Is positive overall.
AAPL GEX Levels: www.geeksoffinance.com
In closing, we have a few potential bullish signs from a contrarian perspective, though the volatility election night may be dramatic both ways. The VIX (chart below) shows-yet again- heavy volume at 14-15, implying that lower targets are indeed live in the event of a vol crush. We will continue scanning for different ideas!
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