February OpEx: What Does GEX Say?
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Indices showed weakness early on today, gapping down and flirting with a break of SPX 6100 before buyers stepped in and bought the dip. SPX still closed red, but it closed essentially right at the Hull moving average (technically just below it by a point), keeping open the possibility that we rally OpEx Friday. In Discord, we shared what GEX was showing this morning in our free channel when SPX was around 6100, noting the 6080 cluster on the 0 DTE graph was a huge potential target given the negative GEX this morning. Sure enough, we bottomed just above 6080, rebounding nicely from that area. We’ll look closely at the gamma exposure (GEX) clusters for SPX and QQQ. We cover some of the same information as well as some different and important points in today’s YouTube video, so check it out by clicking here.
Despite SPX closing one point below the Hull, and lower for the day, we still see a sharply ascending Keltner channel and a closing price that is close enough to the Hull to consider the upper targets live. The upper Keltner channel using my settings sits at 6218 currently. What does GEX say? Can we find additional clues as to which way we go?
SPX saw a considerable drop in net total GEX today, but we still see over 1B positive, which is our line-in-the-sand for a neutral versus bullish environment. So SPX is still looking bullish from a total GEX standpoint, despite the negative change.
6200 is standing firm as the upper Dealer Cluster zone, stretching up to 6300. The growth in GEX at 6200 has been notable and we’ve focused on it for days. However, in the short run, GEX we saw clustered at 6200 for tomorrow’s OpEx disappeared, shifting to the 28th and every week into late March. The light blue denotes today’s option volume. Note the outsized volume at 6150?
Another data point to accompany the option volume at 6150 is the 2nd largest GEX cluster for tomorrow, which also happens to be at 6150. We see 6130 as the largest cluster, but 6150 is a close 2nd, so we have a pretty good shot (according to GEX) of attempting a move toward those higher strikes. Looking out into March, we have 6200 and 6300 prominently displayed, and we even saw 6600 pop up looking out into the Summer. 666 March 2009 low, 6666 2025 cycle high? I won’t go off the deep end here, I’m just hungry and haven’t eaten dinner yet, so forgive my musings.
QQQ behaved very similarly to SPX, closing barely below the Hull, seeing the Keltners and the Hull continue to rise, and maintaining a picture that leans positive.
The most concerning thing for QQQ is the sharp drop in GEX. Recall the 2 day lead back in January? It’s too early to say if this is an early preview of upcoming weakness, but we’ve been highlighting VIX divergences and a view that we are due for an intermittent pullback before we climb into late March, so it’s time to be watchful every day toward risk. We took profits on some longs in our educational portfolio this week and extended or rolled our hedges.
On the more positive side in the short term, and also consistent with what we see on the 3D graph for SPX, QQQ’s largest GEX cluster for tomorrow is at 540, so we see fairly good odds of a push higher at some point tomorrow (or possibly starting out higher with a gap up, we’ll see).
The VIX continues to show lots of interest in higher strikes, in fact today’s 2nd highest volume was at the 42.5 strike. Don’t hide in the closet just yet, but volatility isn’t showing much interest in dropping further from here, and it seems like this would be the week for the VIX to get killed, since it’s OpEx. I’d like to see VIX 14, but the market left me a little note under my pillow this morning that said “Mrs. Market doesn’t care what you want.” Ouch. Harsh!
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