I Think I see….Something Red?
It’s been a few weeks since we really emphasized some eye-opening VIX observations, in fact, it was (correctly, in hindsight) right before the last VIX spike. In today’s newsletter, we’ll say “hello!” again to those devils on our shoulder, VIX and VVIX, which we also bring up in today’s YouTube video. We also discuss BABA, BTC, META, and SPX.
The VIX has regained the Hull Moving Average after spending 7 days below the line. I highlighted a few select instances recently where a close above the Hull was met with at least several days of the VIX rising, and you can see that the Hull has been fairly consistent in providing a good signal. This is also true when it’s below the line.
Same with VVIX (below), the index measuring the future expected volatility of the VIX. We also had at least one day recently (yesterday) where the VIX and VVIX showed negative correlation. One day isn’t enough for me to consider a reliable signal, but if we see a few more days like it, we have increased odds of a VIX spike. Even without that, we have seen the VIX rising since yesterday, including a higher close today than yesterday’s close.
The VIX and VVIX signals accompany SPX breaching the upper Keltner channel in a narrow wedge, which is really characteristic of short-term topping patterns. We have a very solid uptrend, so don’t confuse a likely pullback with a call for a crash, but of course the full range of possibilities does exist, even if it’s not probable. We’ll spend time discussing events that we feel have high odds of happening and we’ll leave the exciting predictions to those with more active imaginations.
One other point of precarious precaution involves the Hull, which is rapidly approaching the narrow price candles we see at the upper Keltner. Look at what happened the last time we saw this in mid-November. The Hull reached the top Keltner, almost touching it, and by that time SPX gapped below the Hull and made its full downside move in two candles. Risk can happen fast, and my spidey senses are sensing a little risk as the Hull is almost to the top Keltner as we speak, with the VIX doing funky things (highly technical term I picked up studying for my doctorate in VIXology) and a lot of individual stocks looking toppy.
Overall, even within this environment that is ripe for some sort of pullback, SPX GEX shows positive GEX clusters up to 6200 and even higher, though these have so far been unable to attract enough interest to exceed the GEX at 6100. If somehow SPX overtakes 6100 and parks there for a few days, we may see GEX shift upward and all of the chart indicators I mentioned could catch up, causing SPX to suddenly not look so precarious. A lot of factors say this is unlikely at the moment, but it’s possible.
SPX GEX Levels: www.geeksoffinance.com
Looking at the 3D graph, SPX doesn’t have any large singular GEX clusters at positive strikes above 6100, which I find interesting. 6055 is a large cluster for 12/31, but that is clearly lower than 6100, at least according to my abacus. I don’t draw any conclusions about the future from this observation, but we can conclude that 6100 holds a lot of significance for tomorrow (Friday) and the field is fairly wide open beyond tomorrow. Remember the GEX levels chart earlier? It shows a cumulative sizable net positive cluster at 6200, but as you can see using deductive reasoning as you look at the 3D graph, 6200 is fairly spread out, without any significant isolated date to attribute importance toward. I find this a bit “suspect” because as we approach next week and the week after, if 6200 doesn’t show up as a big cluster relative to other clusters, how can we pinpoint a date where 6200 is very likely? My conclusion is not that we won’t hit 6200, but that if we will, we need to see a lot more positive GEX show up at 6200 on at least one isolated date in the future in order to have a relevant target.
We’ll see some strike gain traction as a likely target. But will it be higher, or lower?
SPX 3D GEX Graph: www.geeksoffinance.com
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