Daily Newsletter: Potential Change On The Horizon?
Geek’s Daily Review: Monday, August 12
The question posed is obvious, markets always change…Not as quickly as my dry sense of humor, I’m sorry to say for your sake.
This morning, as on many recent mornings, we were able to identify likely targets as presented by 0 DTE gamma (GEX) and the accompanying GEX flow that we post on our website, www.geeksoffinance.com. We shared the following chart in our free Discord channel, highlighting the volume at QQQ 455 in particular. You’ll notice the 450 strike also saw a sharp move in the opposite direction, but with GEX positive overall for the day, and other strikes moving positively on the flow chart, we felt that 455 was a more relevant target.
While the move had already begun, plenty of “meat” was still on the bone, with QQQ rising to a high of 454.37. GEX targets are sometimes exceeded, but sometimes we see price fall shy of the target, so “good enough” is typically what we aim for when positioning for a move.
QQQ dropped somewhat after reaching the high, then moved sideways before slowly inching higher into the close, printing a doji candle for the day. Candle enthusiasts will point out that the doji itself can be a reversal candle or a continuation candle, though it’s interesting that this doji is printed at a point where we exceeded the middle Keltner channel and rejected that excursion.
Do we gap above the line tomorrow, or fall back to retest the 437 Hull Moving Average? Let’s keep searching for more clues.
The GEX Levels chart we provide on the website shows some noteworthy possibilities. First off, we see a tight range for the G1 and G2 dealer cluster zones. But we are currently hovering around a potential selling zone, and I point out elevated volume that we saw today at the 445 and 440 strikes. 440 in particular is the top of the range for the next dealer cluster zone, which runs from 433 to 440. Remember that Hull Moving Average right at 437? Smack dab in the middle of the box, perfect. The market never cares about what I want to see, but I can still throw a pre-1982 95% copper, 5% zinc penny into a fountain and make a wish for that tag later this week (I’ll recover the penny afterward for melt value of over 0.02, just to reduce my risk on the wish).
While SPX is technically in neutral GEX territory, SPY is still firmly hanging out in solid negative territory, raising questions about why it has been here for so long. I don’t believe we’ve seen negative GEX staying this negative for more than a week in quite awhile, and certainly not as far as the visibility on our 30-day chart.
IWM is intriguing in that GEX is still negative overall, and we are near resistance on my charts, yet we see a much higher GEX-indicated ceiling if IWM can muster the energy to rally. We’ve noted what we’ve speculated to be more positive aspects of IWM relative to other major indices, and we’ve certainly seen periods of sharply contrasting performance and rotation. Today, volume was elevated at the 210 strike, which matches up with a fairly sizable negative GEX cluster and some theoretical resistance lines on my chart. Perhaps we can view that as a pivotal area short term.
The largest GEX cluster is still at 200, so we have to allow for the possibility of lower before higher.
Thursday evening, we brought up GLD as a potential opportunity based on what GEX was telling us, and sure enough, after teasing both sides Friday (but with a gap up), we saw a nice rally today, almost reaching 229 and closing at highs. We were looking for 230-235 and we are almost there. With the Keltner channels in a solid uptrend, and room overhead, we can certainly move higher from here, but I wouldn’t have any interest in opening new positions personally, and managing risk becomes paramount, especially with GLD..Just look at the last few times we had big green candles.
What Do We Expect Heading Into Tuesday, August 13?
Wednesday represents the first big economic data with CPI at 8:30 AM, then a slew of data Thursday and housing/consumer data Friday morning (schedule courtest of Econoday.com). If I am taking a short-term trade, I would rather wait for the binary event instead of preparing to be tossed around in a barrel over Niagra Falls.
We’re beyond earnings reports from the big tech names, but we do have some semiconductor equipment names and big retail names like WMT that lay ahead. We are left with the chicken and the egg argument with earnings and economic reports: Do the reactions organically occur based on the substance of the release, or do technical factors and/or algorithmic “pre-destination” dictate the moves? I find the topic intriguing, but I haven’t yet drawn a helpful conclusion, except to avoid trading such risks and instead react to the opportunity-post release. We’ve enjoyed the results of reading the GEX structure in the morning, so we’ll continue to do so. Join us as well in Discord, where we share a lot of what we’re seeing throughout the day.
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