Time For Another Move In Volatility?
We don’t always know which way the market will go, but we have consistently been identifying eventual targets with our intraday sharing in Discord, with this morning as a good example:
The graphs above show that our gamma (GEX) data reflected 5675 SPX and 478 as likely initial targets, and sure enough, the highs of the day were SPX 5670.81 and 477.60 QQQ. I’d call that pretty close, and we identified those levels near the morning lows (almost exactly, in fact).
Otherwise, no big surprises with the VIX holding the current levels into VIX expiration tomorrow morning and the market itself awaiting the Fed announcement tomorrow.
What Do We See Ahead As We approach The Rate Decision Tomorrow?
We posted a new YouTube video this evening, addressing some levels on SPY, a few stock ideas (NVDA, AAPL, TXN), and tying in VIX GEX as we approach the pre-market expiration for monthly VIX options. Let’s start out in the newsletter looking at the VIX: The biggest negative GEX going into tomorrow is at 17, with lesser (but still large) clusters at VIX 18. Looking at the positive GEX on the VIX, we have big clusters between 19-22, with 20 being the largest. If we think about the VIX options from a “max pain” perspective, seeing the VIX somewhere between 18-19 would see a lot of options expire worthless, though that’s not a guaranteed outcome. We do have housing market data coming out pre-market, which may serve as an excuse to see volatility expand or contract toward one of these points.
3D VIX Chart: www.geeksoffinance.com
Since we primarily focus on SPY in our YouTube video, let’s take a glance at SPX in the newsletter, starting with the TradingView chart. Keltner channels show 5750 as an upside boundary, 5563 as the middle Keltner (also coinciding with the Hull Moving Average), and 5374 on the downside. The chart is in an uptrend, with the candle from a week ago wicking below, showing eager buyers for the time being.
But with implied volatility low, and the market having rallied significantly off of the lows, we need to look at other potentially conflicting signals (if they exist) in order to have a gameplan in mind if we want to react to price movement before or after the announcement tomorrow.
Historical GEX remains quite strong, with SPX actually seeing a slight increase in total GEX today. 1.2B is a bullish level, though recently it has marked tops. To cut to the chase, and this is a guess to be proven correct or incorrect tomorrow, I wouldn’t be surprised to see us trade higher at some point tomorrow toward the 5700-5750 area, whether that’s before or after a selloff of some degree. I will NOT be comfortable holding at that level, since it represents a big GEX dealer cluster zone and we are potentially due for another pullback, even if it’s in the context of an uptrend.
SPX Historical GEX: www.geeksoffinance.com
Let’s glance at a few levels on our new SPX chart, which our subscribers can toggle on/off depending on the format they prefer. In some ways, these top 3 GEX levels charted out give us some sense of upside/downside potential and whether one side of the equation appears to be asymmetric. These levels also match fairly closely to the Keltner channels, you might notice, which adds validity to my using those as indicators. I have had to change my indicator settings at least 3 times in the last 6 years, so what works does change, as a disclaimer..We always have to evolve as traders.
We also see a similar setup with QQQ, with 480-485 as potential upside targets in a spike higher scenario, but amazingly, that 440 lower target has been quite stubborn ever since this move higher started, which I see as another reason for caution. In bullish markets, we often see the lower GEX clusters move higher as price moves higher, but these lower targets have not budged for weeks. This doesn’t mean we’ll hit those levels, but it certainly perks my unibrow.
QQQ GEX bounced perfectly off of the zero GEX level we highlighted yesterday, shared without additional commentary, other than the fact that this doesn’t build confidence for bears just yet.
QQQ Historical GEXt: www.geeksoffinance.com
More often than not, historically speaking, rate cuts (as expected for tomorrow’s Fed announcement) are often met with an initial rally in the next few months, but then the hangover later can be brutal. This pattern would certainly fit the “they’ll prop the markets up until the elections are over!” theories, though we’ll leave those conclusions to analysts with a higher pay grade. Instances do exist where we saw the market drop initially in ensuing weeks, but the odds seem to point to initial optimism.
With GEX In conjunction with several other factors, we’ve been able to avoid guessing our next moves based on historical event outcomes, instead, we can watch for shifts in GEX and look at our next trades quantitatively independent of a story or narrative. We have a great group doing that almost every day on an intraday basis.
join us in our free Discord channel or become a subscriber And we will share some real-time updates on how we see GEX shifting in the 0 DTE markets. Hopefully you’ll join us!
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