Approaching A Possible “Breather?”
2025 WINTER SUBSCRIPTION SPECIAL- Due to popular demand, we’re extending our Winter Special of $300 off of the annual Portfolio Manager subscription through February! Either this weekend or early next week, we’ll be rolling out even more new features, including backtested algos and indicator overlays, so we hope you’ll join us for the ongoing improvement of our total offerings! Enter code WINTER2025 at checkout.
As you can see on the TradingView chart below, SPX has seen cash session buying virtually every day except once since the early February low. Even gap down days were bough with higher closes. The strength has been notable until Friday, when we actually see what might be an indecision or reversal candle. However, this candle is not present for QQQ, and several signals seem to suggest higher odds for at least a brief push higher before relatively meaningful downside may be experienced. Beyond the possibility of a short-term pullback, gamma exposure (GEX) still suggests strength into the end of the first quarter, so any upcoming pullback may be a buying opportunity. We discuss the odds of moving higher with the context of some near-term risk in today’s YouTube video, so check it out by clicking here.
SPX saw noteworthy option volume at lower prices Friday, which is indicated by the light blue horizontal bars at each strike, and we’re in the upper Dealer Cluster zone. Note that the zone stretches up to 6200, so while we’re technically in the zone, we could see a deeper push into the box. The upper Keltner channel in the chart above might be a target, which would place SPX’s price toward the higher end of the box. Not picture are the upper channels that we see in smaller timeframes (2-hour and 4-hour charts, for instance), which suggest at least some caution approaching 6150-6180 as well.
A potential contrarian warning exists in SPY’s total net GEX, which rose to over 2B Friday, the highest level since January 22. Note that the January 22 GEX high preceded the price high by 2 days. Note that GEX really fell off by that 2nd day, seemingly leading the correction, though this isn’t always the case. An extreme (extreme as measured by a comparison to GEX over the past 52 weeks) reading is not a requirement for a pullback, but oftentimes really high readings can mark reversals. The analogy of the ship tilting over because of everyone being on the same side of the ship comes to mind.
SPX is also approaching an extreme, but SPY paints the more dramatic case, and there’s an argument to be made about retail sentiment and SPY as contrarian signals, given the prevalence of retail traders trading SPY compared to a potentially more institutional/professional element trading SPX options, if that makes sense. While SPX and SPY obviously follow each other in terms of price movement, GEX can be dramatically different at times for the two.
QQQ is looking the most bullish as of late, with big green candles closing out each day, and a clear possible pathway toward the upper Keltner at 542.97. This target is close enough that we might even hit it Monday, particularly given that futures are already positive. A lot can change premarket though, so nothing is certain entering tomorrow.
QQQ’s upper Dealer Cluster zone continues shifting higher, reflecting a range of 540 to almost 550, with the upper Keltner channel near 543. We do see the same phenomenon observed with SPX though: More volume at lower strikes despite the conflict of greater GEX concentrated at higher strikes. We give more weight toward GEX (hopefully obvious), but heightened volume is still worth watching in terms of noting areas of potential interest amongst participants.
QQQ net total GEX also expanded its recent extreme reading, reaching almost 733M Friday.
Before we wrap up tonight’s newsletter, let’s look at the VIX, and let’s also make an important calendar observation: VIX monthly option expiration is Wednesday, the 19th, and we still have a huge amount of negative GEX at 15 and 16 strikes. While anything can happen, the odds are that we won’t likely see a huge spike in the VIX until we get beyond the premarket Wednesday option expiration, and we have monthly option expiration for indices approaching this same week on Friday. With the market fairly “bulled up” lately, a lot of call option premium is floating around out there…It would be a shame if a lot of that was looking great early in the week and then got incinerated by Friday..But these speculative possibilities aren’t actionable without other confirming evidence, and we don’t know if we’ll get more by mid-week. I bet we will have a sense of whether or not the VIX is at a lower extreme or not, though.
Friday was pretty lopsided toward positive strikes for the VIX, especially at 20, 23, 30, and 35. We’re at the lower Dealer Cluster, though when I look at the chart, I see potential for the VIX to drop all the way to 14.3 or even 13.98, so as we mentioned earlier, this bullish market may press higher yet again before seeing a drop later. And this next drop is likely a buying opportunity..The trick is to have capital available if that happens.
Here’s the Discord link if you haven’t joined us yet! Access is free for some channels, and new members have a 7-day trial to see how we operate. We have an active community of thoughtful traders who chime in throughout the day.
If you’re interested in accessing our tools and analytics, be sure to check out our website! More improvements coming in February!
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.
