Signs Of Relief
For starters, tonight’s YouTube video can be viewed by clicking here, which is only a few minutes long and discusses aspects of the market that are complementary to our discussion in the newsletter. We also throw in a few specific tickers, typically, including BTC and AAPL tonight.
Last night’s newsletter mentioned a desire to see VVIX down 10 points (meant to be an approximation) to give a better indication of a possible deflating of volatility down the road. Well, we didn’t see VVIX down 10 today, but it was almost down 9, a substantial decrease in participants bets on higher future volatility. Said otherwise, participants displayed expectations of lower volatility in the VIX looking ahead. Technically, VVIX also closed below the Hull moving average, potentially opening the door to 103.
We also saw the VIX close below the Hull, another condition I’ve been awaiting in order to shift expectations to a more short-term bullish view toward indices. The lower Keltner channel on the VIX is diverging from the otherwise bullish (for volatility) upper Keltner channel, so we have conflicting signals from the VIX. To add to that, we see gamma exposure (GEX) at 30 and at 42.5, accompanied by substantial volume today. We can only speculate when it comes to the “why” as we look at specific volume, but in general, I see volume at higher VIX strikes as cautionary for market bulls. Even with those potentially bearish counterpoints, I assign more value to the largest GEX clusters being at lower strikes and the daily close below the Hull, both of which are bullish for stocks.
SPX also barely closed below the Hull, so we can give SPX a 2nd place trophy (does 2nd place exist with zero sum games?). Even to close at a price this close to the Hull is something we’ve only seen one time out of the last 9 trading sessions, so I’d consider it a victory for bulls. On the downside, it’s a negative that the lower and middle Keltner keep dropping, so any negative move away from the Hull could mean another lower low. I am still more toward the bull camp at this point personally, but I want to emphasize that we have to consider the uncertainty at all times and know where our pivot points reside. We are right on the line, as far as I’m concerned.
SPX total net GEX was another positive today, closing with positive GEX for the first time since February 20, if you can believe that. Believe it or not, it’s true, which (from a practical perspective) implies that volatility may have a more difficult time expanding as dealers are incentivized to buy when other participants sell, dampening volatility. Obviously many drops begin from a point where GEX is positive, but it’s more like pushing a beach ball under the water, to use an analogy.
I had to rub my eyes after seeing this one- QQQ closed with positive GEX today. Wut? Yes, positive. I’ll Lastly, let’s revisit yesterday’s potential signal delivered by IWM and QQQ, the indecision candle and sharp increase in GEX for QQQ (while IWM was near a negative extreme). We displayed IWM yesterday, so tonight I’ll show you QQQ. We saw follow through today, exactly what I had hoped to see. QQQ closed above the Hull, which I consider a strong positive. I don’t like that we still see a lot of GEX at lower prices, but we didn’t see a lot of volume at lower prices, so we have some uncertainty here. I wouldn’t call today’s close decisive, but combined with a sharply lower VVIX, closing above the Hull, and SPX crossing into positive GEX territory, I would rather not be heavily short as QQQ is down roughly 10% from the highs. We will take it one day at a time and we hope you’ll join us in Discord as we navigate choppy waters.
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