VIX: Pushing On A String While Bells On Bobtails Ring
2024 HOLIDAY SUBSCRIPTION SPECIAL- $300 off of the annual Portfolio Manager subscription! We JUST rolled out 500+ new stock and ETF tickers on the dashboard. Check it out for yourself! Enter code HOLIDAYS at checkout! We still have 3 of 7 discounted subscriptions available for this limited time promotion.
Friday saw early market weakness with an attempt to recover losses as the day progressed. We did see early signs of DIA outperformance, at one point rising into positive territory, which QQQ and SPY couldn’t quite muster. While the VIX at one point rose to 18.45, the VIX was crushed back to below 16 by the end of the day. At a cursory glance, the big moves down in the VIX (once again approaching a major level that may act as “support”) seem to be quite large for very little benefit to the overall market. Is this a sign that the VIX crush is nearing the end of its useful life short term? Our latest YouTube video addresses some factors regarding SPY and the VIX that may impact the short run. We also discuss BTC, PLTR, META, amd TSLA, so check it out. You can watch it by clicking here.
Strictly looking at the 4-hour VIX chart below, we see the VIX approaching the 9 day SMA below, and the Hull Moving Average is just beyond that at 14.66. These areas present potential reversal zones or at least areas to watch for any reaction that may occur. The upper Keltner channel is actually beginning to turn higher, which is also interesting.
While those are certainly marks in favor of VIX longs, we must note that the 4-hour chart for the VIX does have room down to 12 if we lose the Hull, in my opinion.
Friday’s option activity shows VIX 30 to have had meaningful relative volume, though we don’t see much to note otherwise (volume at 16-19 made sense given the range for the day). To wrap up today’s discussion of the VIX, the big picture remains that the largest GEX clusters for the January VIX expiration (quite some time away) are at 15 and 17. We’re in a Dealer Cluster zone and holding. Even if the market rises for a few more days, which is entirely possible and we would even say probable, we may be entering an area where the VIX will have a hard time pushing lower.
SPX might have put in a red candle Friday, but the long tail indicates willing buyers below the Hull, and closing above the Hull maintains the SPX long signal according to my own methodology. The Keltners still look bullish as they’re angled upward and to the right, though we do need to watch the downtrend line created by the decline that started at the beginning of December. This area is right around the middle Keltner at 6000-6015. below 5953 appears to be an area that could sustain a downward move, but shorting above that line becomes more speculative. While we won’t go over QQQ’s chart today, note that QQQ is still below the Hull, which is a short signal for me. I’m open-minded to a possible market rally that focuses more on DIA than on tech…it’s at least possible and it would represent the inverse of what we saw earlier, with QQQ rallying and DIA dropping.
SPX GEX dropped sharply as of Friday’s close, and while -429M is what we consider neutral, the change was well over 1B, which is certainly a negative shift in GEX. We’ve seen big swings every few days lately, which can coincide with larger trend changes, but we’re also at the end of the year, so we need to consider multiple factors in our decision making process. End of year often sees rebalancing, tax-related sales, window dressing by Wall Street (buying the companies for their portfolios that already did well so they show to own them), and other incentives that aren’t always present day-to-day.
On the bullish side, which I think adds some credibility to the chart showing SPX above the Hull, our GEX levels chart shows volume at 6000 and 6050 Friday, and more importantly, we are within the upper portion of the Dealer Cluster zone where dealers may become buyers. Note that this box extrends quite far down to sub-5900, so touching the top of the green box is not an automatic “all-in” by any means, but it’s an area where we start to view the risk-reward of further downside to not be as compelling unless superseded by a number of other outside factors.
One scenario that I still think potentially holds merit is DIA (and perhaps IWM) outperformance relative to QQQ either imminently or perhaps after the first of the year. DIA’s price is right at the lower Keltner channel, GEX is relatively very positive (more on that shortly), and DIA is above the Hull after a historic drop through more than the first half of December. We already saw relative outperformance Friday (though still red by the end of the day), and a few other factors stand out that we’ll look at below.
DIA’s GEX remains elevated at positive levels despite price only barely being off of lows. This is a positive divergence not seen in SPX or QQQ.
DIA has noteworthy GEX at 445 and 450. It is unusual that we see such a large negative cluster at 445, which means it’s in the money, but a positive scenario might see this level act as an accelerator if price gets above that negative cluster, since covering is akin to buying. It’s also possible that 445 is formidable resistance and marks the top of a possible rebound, but that’s still a meaningful degree higher from present levels.
Looking at the GEX chart below, the Dealer Cluster zones aren’t helpful because that big negative cluster at 445 creates a potentially confusing picture (for those visually inclined to looking at the red and green boxes), but we have to remember the big picture that GEX is positive, we have favorable positioning based on the Keltner and Hull indicators, and lastly, we see big volume at the 450 and 445 strikes Friday.
While the VIX is likely to slow its decline soon, or at least stage some sort of battle at key support down to 14.66, we still see a potential setup for one or more indices to mount a final hoo-rah into the 31st. We’ll continue monitoring how the situation unfolds. Join us in Discord as we discuss what we see intraday. We expect GEX will give us some hints as to where we’re heading looking forward and we hope to see you there!
If you’re interested in accessing our tools and analytics, be sure to check out our website. We just rolled out 500 new tickers and speed enhancements!
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.
We recently posted a YouTube video, and we have many other short videos, so give our channel a look if you’re curious about recent market commentary and ideas as well as gamma (GEX) concepts explained.
Thanks for being part of our community and know that we invite your feedback!
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.
