Approaching Quarter-End
This is probably a good time to zoom out and remind ourselves of some historical tendencies as we enter the end of the quarter, but also the USA presidential election in November.
While Wall Street would love to end the quarter on a high note given the positive performance since the beginning of the quarter, and many managers end up “window dressing” their portfolios to reflect what performed well, we have a counteracting aspect of seasonality during election years, which calls for weakness into late October before a year-end rally might ensue.
Seasonality chart: Fundstrat.com
If the typical election year seasonality holds up, we want to look for a market top soon. We already alerted readers of our newsletter to the contrarian signal displayed by the extreme positive gamma (GEX) on SPX last week, and that has led to perfect initial follow-through as markets fell late in the week.
We still see SPY holding the Hull Moving Average despite the narrow candles typical of a top, so perhaps we may see an attempt to reach a higher high one more time. The Keltner channels (lower band at roughly 539, upper band at 577) match with the GEX levels we’re watching between 575-580 for SPY on the upper limit. Click here to watch a video posted this evening where we address SPY, QQQ, SMH, GLD, TSLA, and more.
Our GEX levels show SPY having reached a potential dealer cluster zone where selling may happen, and sure enough, we’re rejecting off of that general area. Keep in mind that a climb deeper into the zone would be perfectly reasonable given our historical experience, though it’s not a requirement before seeing more downside. Is the top already in (for now) or will we see games into the end of the month to keep markets propped up?
SPX GEX levels: www.geeksoffinance.com
SPY total GEX took a big and abrupt plunge down to negative territory after reaching almost 2.6B positive, a dramatic move characteristic of the market as of late, swinging wildly depending on the flavor of the day.
SPX Historical GEX: www.geeksoffinance.com
Interestingly, the 570 strike is a big one for quarter end, which is a Monday at the end of September. Does this imply that we stay propped up and somewhat close to 570 this week? Seems like the market never makes it THAT easy, but we will keep an eye on that possibility. Let’s keep looking.
SPY 3D GEX graph: www.geeksoffinance.com
In recent weeks, we commented on DIA as having the most bullish picture, and indicating a strong chance of a rally to 420+. We definitely got this, as DIA rallied to roughly 423 and it’s still holding the Hull Moving Average.
Perhaps a telling hint, DIA GEX actually shifted more positively, with the upper dealer cluster zone actually reflecting 430 as a target now.
DIA GEX levels: www.geeksoffinance.com
DIA positive GEX is focused on 9/27 instead of 9/30, which might be an even more helpful hint as we approach quarter end. Perhaps we will see the high on Friday instead of Monday, in other words. All of this is subject to evaluating GEX as it may or may not change as we go through the week, so stay in touch with us via Discord (and this newsletter) where we will try to share our observations in a relatively timely manner.
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 and looking ahead. Hopefully you’ll join us!
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