CPI Preview: Potential Catalyst?
QQQ was the last of the major indices to lose the Hull Moving Average, a condition I consider bearish as long as price remains below the Hull. The initial loss of the Hull today didn’t involve a sharp move lower to pass through the Hull, but rather the Hull rising in such a way that the indicator itself rose above QQQ’s price. In my methodology, the result and significance toward my bias is the same. None of this factors in gamma (GEX), so I’m speaking in reverse order of significance, but the two often coincide, and we definitely implement a holistic approach in how we factor GEX into our “Geeky” trading. We posted a brief 8-minute YouTube video where we discuss SPX as well as GOOG, AMZN, and more, so give it a look for some additional context around an important trendline we’re watching as well.
We made the point in Discord today that major economic catalysts can invalidate or at least introduce an unpredictable factor into the equation, and tomorrow’s CPI report at 8:30 AM ET certainly qualifies. I still observe that uncertain directional catalysts still tend to respect levels that everyone is watching to an extent, so we’ll take a look at some levels in the broader context of GEX and upcoming announcements. In addition to CPI tomorrow, we also have the 10-year auction later in the day, then jobless claims, PPI, and the 30-year auction on Thursday, so no shortage of opportunities for reversal or further momentum in one direction.
Econoday.com
We mentioned QQQ losing the Hull, which is potentially a bearish signal, but we also need to point out that the Keltner channels are pointing sharply higher. Before this “pullback” started, we noted that GEX indicated a likelihood of higher prices going into the end of the year, but also that we foresaw an immediate pullback of some degree, as readers of this digital pamphlet and watchers of our YouTube will note. Recent developments still justify this view, with new highs potentially on the horizon. But where does the drop stop? No one knows, but if the Keltners have any say, QQQ will find religion somewhere between 495 and 510. For SPX (not shown here today, sorry for the visually stimulated), the same Keltner limits using my settings show 5855 and 5984.
For QQQ, holding above 524 opens the possibility of 527 to the upside, in my view. The rate of ascent has meant that the upper bands are increasing by several points daily, an obviously unsustainable condition, but it’s the current condition. I’m pretty sure the doctor said the same thing to me last week..
Do we see any evidence that QQQ might see an initial upside move upon CPI being reported, especially after drawing in some bears today and facing such a report in the less liquid premarket hours, when the cash market can’t bring their grumpy morning hate selling? I’m glad you asked, we do have some reasons to be open to the possibility of a rip before a “dippier” dip. Keep in mind, this is premarket, we could rally and then reverse lower in the hour before the cash session begins, so this is likely a spectator sport anyway. The higher probability play (in my view) will be to consider new evidence after the market opens at 9:30 AM and respond to that instead of taking a larger gamble/guess just for the sake of trading. Play a game if you’re bored early in the morning, as long as it doesn’t involve playing in traffic.
Moving on to the “evidence” mentioned- we have QQQ in a G2 Dealer Cluster zone, with GEX overhead at 525, 530, and 535. However, with negative GEX currently, and a lower reading than Monday, the bias is lower to neutral for now. We also need to pay attention to the depth of the green box, where dealers may become buyers, as it extends all the way down to the 510 area.
QQQ’s 3D graph, as shown on our website for subscribers, indicates roughly -304M of the total -375M GEX expired today. To me, this demonstrates how dynamic GEX can be in a short term environment where 0 DTE rules the day. To state it differently, when the market opens tomorrow at 9:30 AM, we will theoretically see QQQ back to almost 0 GEX, depending on how participants position following today’s expiration. This dynamic is challenging for those looking for a swing trading signal on the broader market, but at least we’re still getting decent intraday clarity looking at 0 DTE GEX early in the morning, as our subscribers will attest.
Lastly for tonight, let’s take a look at Bitcoin, particularly in light of cryptos spectacular move since November. To start with, excluding GEX, let’s just look at the chart: A huge, positive move since November, and an ascending wedge of sorts as we consolidate into December. Overall, this looks fairly bullish to me. The Keltner channels are still climbing, and any pullback is likely to be viewed as a buying opportunity down to the mid-80k range. The market profile traders will note the “weak structure” with the huge candle around 80k, and that may be a legit concern, or should I say, opportunity. The upper Keltner points to almost 107k.
Looking at BTC’s historical GEX picture, we saw a huge positive GEX move after November 24, but that has tempered somewhat, though we (importantly) still see positive GEX overall. The most bearish factor (from a timing standpoint) is that the price of BTC is below the Hull, as shown on the chart above.
Alright, so BTC looks fairly indecisive overall, despite a bullish chart. How might this play out in the short run? Let’s look at our GEX Levels chart. We are bouncing out of a G2 Dealer Cluster zone, and 100k is still a meaningful GEX cluster overall to the upside. We did see most of the volume at lower strikes. Since we’re below the Hull, and we see volume at lower levels, I still give the edge toward rejection at key resistance levels, but ultimately I don’t see a strong setup in either direction. I personally feel like missing the first move and going long on a hold above 99k would fit my process the best, or a loss of 95k..Regardless, we’ll be sure to provide an update as the data changes.
We likely have some great opportunities coming up as we approach the end of the year, so join us in Discord as we discuss what we see coming. We’ll be active and posting some updates and we’d love to see you there!
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