Change Is In The Air…
The FOMC announcement didn’t really rock the boat today, with SPX having a fairly “boring” day compared to some FOMC days in recent past. Powell cut by .25% as expected. Gold recovered about half of yesterday’s loss, DXY got smoked, and the VIX is ever so close to 15. We spent time on IWM and SPX yesterday, so let’s check out QQQ for the sake of today’s newsletter. We did record another short YouTube video (link goes straight there), where we discuss the SPY, CRWD, and LMT, as well as the AAII survey.
QQQ reached the 510 target we mentioned, and in fact, it’s almost to 515, which appears to us as the highest larger GEX cluster remaining. We are above the daily Keltner channel and some sizable gaps exist below.
Last time GEX Was this high (see graph below), QQQ dropped within 3 days, and went even lower by early November. In other words, similar to IWM, sometimes comparatively elevated GEX levels to this extent can mark short-term tops, despite our general assessment that positive GEX is positive for stocks in future.
QQQ Historical GEX: www.geeksoffinance.com
QQQ’s GEX picture has not really shifted yet, which is a red flag for bulls in the short run. If QQQ intends to continue moving higher uninterrupted, we want to see GEX growing at higher strike prices along the expiry timeline. But we don’t see that yet, at least not to a great extent. The GEX Levels chart shows that QQQ is deep within the red G1 zone and there’s very little GEX above 515.
QQQ GEX Levels: www.geeksoffinance.com
To further illustrate the point made above, our 3D graph shows 515 is the largest GEX cluster expiring tomorrow. The tall one behind it is actually at 510. If you look all the way at the back of the room, the December cluster that stands out the most is also at 510. One possibility is that we aren’t seeing the markets intention looking at this graph, or one may also conclude that this graph is telling us that QQQ participants are not expecting meaningfully higher prices from here, at least not in the near term.
QQQ 3D Graph: www.geeksoffinance.com
I decided to survey the landscape of QQQ’s top holdings, and I was actually quite surprised at how weak some of these names look. However, this may spell opportunity in some cases, including AAPL, which broke above the Hull Moving Average today and sits closer to the bottom of the Keltner channels instead of the top.
Today’s close at 227.48 makes sense in the context of the largest GEX cluster expiring tomorrow, which is at 228, but what caught my eye is the OpEx cluster at 235. I even see some interest at 240 (not highlighted below), and I think both of those are entirely possible by Friday 11/15.
AAPL 3D GEX Chart: www.geeksoffinance.com
AAPL GEX is positive, and it has been climbing since the November 1 GEX low. As long as 223 holds on the downside, I will watch for a potential long entry on AAPL. Speaking off the cuff, I almost like the idea of long AAPL, short QQQ as a hedge. Certainly higher odds than zero, in my opinion.
AAPL Historical GEX: www.geeksoffinance.com
One last comment on the VIX: The current GEX structure shows a lopsided weighting toward negative GEX with 14 and 15 showing the highest GEX clusters for VIX expiration 11/20, with 20 as the largest positive cluster, but the positive GEX overall is not very meaningful. The last two VIX expirations that saw the VIX relatively collared between two strikes that were much closer together also showed a more even split between the positive and negative GEX. Could a lopsided GEX structure this far ahead of 11/20 and very little interest below the 14 strike imply the VIX is more likely to go up between now and then? I think it’s a real possibility that we see a market pullback and VIX spike in the next few days, by that reasoning.
VIX GEX Levels: www.geeksoffinance.com
Join us in Discord tomorrow for our discussions around what’s happening as we close out the week!
If you’re interested in accessing our tools and analytics or taking advantage of our promotion (see the top of this newsletter), be sure to check out our website.
If you’re interested in learning more about our strategy and approach, we address all of these topics in our Geek University course which is included in all memberships.
Thanks for being part of our community and know that we invite your feedback!
We recently posted a YouTube video and we have many short videos for you to review where we cover a variety of predictions and educational topics.
The information provided by Geeks of Finance LLC is for educational purposes only and is not intended to be, nor should be construed as, an offer, recommendation or solicitation to buy or sell any security or instrument or to participate in any transaction or activity. Please view our Investment Adviser Disclaimer and Risk Disclosure.
