One Stop Run To Go?
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The narrow candles continue that we’ve seen over the last few days, and gamma (GEX) signaled the lack of movement early on this morning. Personally, I’d prefer to have a wide and tradable range during the day, but in the absence of reality cooperating with my desires, I’d also prefer to know in advance that the market was not going to give me that wide range. Therefore, GEX was still helpful in preventing observant traders from flailing around while they await the rally extension (or drop) of the century..Such a move simply wasn’t in the cards today.
Looking at the chart for SPX, price is firmly holding above the Hull Moving Average and retracing attempts to break below the Hull. This should conservatively be interpreted as bullish, and room exists overhead to see SPX run to 5776 before reaching the upper Keltner channel.
The big question is whether or not this move happens and reverses overnight, or will Mr. Market gift the cash session traders the benefit of the final top and reversal? Recent history has shown a tendency to trap overnight longs or shorts at points of reversals..Just look at the gaps from the tops or bottoms on the short timeframe displayed in the chart below.
Backing the view of a topping process, SPX is hovering just below the red Dealer Cluster Zone. We see a large GEX cluster at 5800 (though not as large as the 5750 cluster), which is very close to the upper Keltner at 5776, so based on those two indicators, a push higher has a fairly good probability of happening, even if only briefly. As a reminder, seasonality in election years means we might see a nice drop into late October, however.
SPX GEX Levels: www.geeksoffinance.com
SPX 5750 GEX is largely focused on quarter end (September 30). This doesn’t mean 5750 hits exactly on September 30, it simply means that as long as that large GEX cluster exists, we see it acting as a magnet sometime before or by next Monday, the 30th. If we hit 5750 (or even 5740+) before Monday, I will personally start looking at the GEX chart to see if we see GEX levels growing at higher strikes or perhaps at lower negative GEX strikes. In other words, when that price area hits, I’ll start looking for the next move.
SPX total GEX is still bullish at 1.6B, though we remain below the highs last Friday.
SPX GEX Levels: www.geeksoffinance.com
QQQ looks very similar to SPX in terms of where price is holding above the Hull, with 494+ as a possible target for QQQ if the upside scenario plays out. A gap below the Hull will put 472 or even 450 in play, as long as we hold below the Hull. For now, all eyes are on where the upside move stops.
One last note on IWM, which we haven’t revisited in awhile. We saw the nice upside move we anticipated from the 200 area, and now, we have a somewhat conflicting picture where we see price below the Hull, yet we see a candle wick on the attempt to push lower, and overall, a flaggy pattern that (to me) has me looking upward toward 227 before we see a larger reversal. Bottom line is that if we see the broader indices make that last push higher, we may have slightly larger upside potential with the smalls for that last move. And we all know “they” love to slaughter the shorts on small cap squeezes..Just look at the move from the lows. IWM has been a laggard for much of the rally, but occasionally, it has its moment of delivering pain to those comfortable shorting.
IWM GEX levels also back the idea of a 225-230 area move before we test out more downside areas.
IWM GEX Levels: www.geeksoffinance.com
IWM’s total GEX picture has held steady after a sharp move up from the lows, maintaining a slightly positive picture after bouncing off the zero line. While not definitive, it certainly hasn’t signaled an abrupt shift back to the negative side just yet.
IWM Historical GEX: www.geeksoffinance.com
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