VIX Below 16: Pushing On A String?
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Yesterday, we reviewed election year seasonality specifically, which points to the historical probability of a retracement between now and just before the election. The last several years have seen many “once in a hundred years!” events, so it’s hard to put total faith in such statistics. If we’re looking at what’s in front of us at the moment, can we tilt the odds in our favor one direction or another?
We cover this question as it pertains to SPY levels and the VIX as well as a few individual tickers (AAPL, META, AMD, and SBUX) in this evenings YouTube video, which you can view here.
One thing we point out about the VIX is that it seems to respect the 2-hour and 4-hour Keltner channels, which is reason enough for me to pay attention when it reaches the upper or lower edge of that channel. We currently see a lower boundary of roughly 15 for the VIX, implying that we have low odds of dropping below that without some sort of bounce occurring after it gets tagged.
Looking at VIX gamma (GEX) levels, we can see the VIX in a dealer cluster zone, with option volume today at 19. While this isn’t conclusive that the VIX will not drop below 15, it at least adds credibility to the idea that we have a good chance of holding 15, considering the Keltner channels combined with GEX positioning.
VIX GEX Levels: www.geeksoffinance.com
SPX continues painting relatively narrow candles, which can be a phenomenon before a trend change, though we’re holding above the pink Hull Moving Average, which gives us a live target of 5773 as long as we’re above 5683.
SPX GEX is solid at 5750, and the Dealer Cluster Zone stretches all the way to 5800+, fitting what we see with the Keltner channels perfectly. In a contrarian’s ideal world, we will see a breakout attempt higher that serves to suck in the “coast is clear” bulls and stop out nervous shorts before we actually see another nice drop, an entirely plausible scenario that has played out before..But the reality is that we are merely proposing possibilities without the ability to see the future.
SPX GEX Levels: www.geeksoffinance.com
We also have to note that while SPX has seen GEX drop significantly since reaching the 9/19 extreme, we are still in solid positive territory, so we can’t turn totally bearish as long as we are holding above the neutral line-in-the-sand at 1B.
SPY Historical GEX graph: www.geeksoffinance.com
This week is fairly light as far as economic activity, though we’ve highlighted a few events that may add to potential intraday volatility, so I would guess most of this weeks movement will be related to quarter-end fund flows and other changes that may be tough to anticipate using the usual signals. Stay on your toes and join us in Discord where we’ll share intraday analysis as we navigate each day heading toward the end of Q3!
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