0 DTE GEX: Order Amidst Chaos
What comes to mind when you think of FOMC (Fed) Day from a trading perspective? I usually envision a market wildly gyrating with every stutter and utterance emitted from lord Jerome’s vocal cords, sometimes the opposite direction of the market’s move upon the initial announcement of the rate decision.
Gamma (GEX) worked just as well today as we typically see on a normal day, with levels advertised early on remaining strong magnets even in the midst of unknown decisions and speeches (well, at least unknown to us).
We just posted a video on YouTube (give it a short look by clicking here) where we review today as well as some new ideas such as EEM, CRM, and 2nd or 3rd servings of previous successful trades for us in GLD and CRWD. As for the newsletter, we will spend some time looking ahead, but first let’s take a deeper dive into the 0 DTE signals we saw early this morning and how they played out.
We noticed early on (within 34 minutes of the open) that SPX and SPY didn’t provide much in terms of clues, with a fairly even distribution of GEX across positive and negative clusters, but QQQ had a sight for sore eyes at the 480 GEX level. Interesting, but let’s check back in as we get closer to the Fed announcement, since obviously a lot can change between now and then.
In our effort to be diligent with our own Educational Portfolio holdings, we locked in nice profits for our $10k educational Portfolio with a position in META, then checked back in an hour before the Fed announcement to see what SPY, SPX, and QQQ showed in terms of GEX.
That stubborn QQQ 480, still there! And it’s also the biggest GEX cluster for the day on QQQ. We can also notice the lack of substantial GEX above 480. Our interpretation is that without substantial growth in higher GEX levels, 480 might be the limit, but that 480 is definitely a live target.
What was the day’s high? 478.83, barely over $1 away from the GEx advertised 480. We subsequently noted caution in that SPX never did show any meaningful increase in higher GEX, even as QQQ approached 479, which in itself was a signal, since any attempt at higher prices would likely mean SPX and SPY would also show GEX increasing at higher prices, particularly given the overlap in SPY and QQQ top holdings.
What happened next? QQQ dropped significantly to a closing price of 471.44, and SPX reached 5618. That’s two for two in my book.
Bulls can take some solace in the fact that QQQ is still holding above key support levels, though any adventures below 468 would have me watching any long positions very closely.
Total GEX (as shown below) also dipped into negative territory, though it’s important to note that a lot of that negative GEX expired today, so we may see a different picture by tomorrow’s open.
QQQ Historical GEX: www.geeksoffinance.com
We’ve noted QQQ’s asymmetric downside relative to upside, at least in terms of GEX dealer cluster zones, but technically we didn’t quite reach the 480 lower limit for the zone where we expect selling, so the possibility is still open that we rebound back to that area before a deeper drop. Either way, barring a substantial shifting in GEX to higher levels, we are likely close to some sort of another retracement lower.
SPX still looks more bullish in totality, though short term, SPX isn’t as close to support as QQQ. My preference (not that the market cares!) is that SPX’s chart implies a “scary” overshoot for QQQ to the downside while SPX reaches its own middle Keltner channel and Hull Moving Average. If this happens, the implication is roughly another -1% lower for SPX, though perhaps I’m looking for too easy of a solution..The market tends to take creative pathways. As usual, I will gladly wait for additional clues once the market opens tomorrow and we see how GEX is lining up across the board.
SPX total GEX is still positive, though below the 1B level we like to see in a bullish trend, which is not surprising after a big announcement and hedges rolling off for VIX expiration. Let’s see how it looks as we approach the end of the week.
SPX Historical GEX: www.geeksoffinance.com
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