Markets moved higher today, and the earlier gamma (GEX) picture was atypical, showing massive positive GEX at SPX 5400/SPY 540 more often associated with an end of day pinning. Meanwhile, QQQ maintained a big negative GEX cluster at 455 until later in the afternoon, without exceedingly larger positive GEX clusters, making me think we had a good shot at fading back toward 455 at some point. While ultimately price didn’t hold further gains after lunchtime, we still maintained prior gains and didn’t fade at all.
We rarely see the GEX profile we saw today, perhaps a coordinated (or uncoordinated) covering of shorts leading into CPI? As we approach resistance points and we’re heading into inflation data with the market already full of rate cut hopium, count me out of betting on a “just right” CPI number. Not that it can’t happen, but that’s not a risk I’m interested in taking. I still buy food at the grocery store, and gas, and I don’t see any huge drop in my bills.
Let’s get a bit more granular on where markets stand, starting with SPX. SPX is on its way toward the middle Keltner channel at 5458, which is declining daily, so tomorrow it will actually reflect a lower target than 5458.

Looking at the GEX Levels chart on our website, we are entering the red Dealer Cluster Zone where we might see resistance and/or selling. I think it’s interesting that option volume was highest today at 5450, even though we didn’t exceed the 5436 area. 5450 is getting very close to that middle Keltner channel I just mentioned, which is also within that red box. With CPI premarket, participants not active in futures won’t have a chance to adjust positioning in the option market until the cash session, so it may be easier to react to the initial move than to position beforehand.

SPX had a sharp increase in GEX, going from negative (though technically within the neutral range) to positive 788M at the close. Last time we were at this GEX level was July 31 with SPX at 5522. SPX dropped to 5186 within 3 days of that tag.

Similar story for QQQ, we have 467 and change looming overhead as potential Keltner resistance, a declining indicator line.

QQQ almost erased its negative GEX, and looking above, we have a big negative cluster at 470 that I expect we’ll approach, or at least we will get closer than we are before reversing lower, in theory.

QQQ is once again about to retest the zero GEX line, a resistance area that has not been kind to QQQ the last two times we came close. Will this time be different?

Bulls will say the reactionary crush of volatility is bullish, it shows that fear was temporary and the result of a one-off market scare. Contrarians will say that the fastest decline in the history of the VIX seems a bit forced and perhaps shows that volatility shorts are piling in once again too quickly, complacent after being shown for 3 years that every microdip is a buy and the VIX eventually will go to zero.
As we get closer to the VIX 15-17 area identified by GEX as an area of interest, I have a harder time believing we are done with the correction, and CPI tomorrow may be a telling pivot point to shed light on the next destination for stocks. With markets rising so quickly in a 4 year timeframe, do you really want to bet on a perpetual party? I would prefer to make strategic bullish bets over shorter timeframes while having a hedge in place as well, meanwhile taking advantage of intraday opportunities like those we’re discussing in Discord on a daily basis.

Brinker might shed some light on the health of consumer discretionary spending in the morning, but it’s likely to be overshadowed by CPI, so as far as earnings go, it might be a better idea to once again look at the initial reaction (and likely deflation of premium in the options market) and reassess companies of interest beyond that.
WMT reports Thursday, we see interest at the 70 and 75 levels preliminarily, but we choose to play lightly or not at all surrounding earnings given the statistical uncertainty around such releases. Join us in Discord and we can at least talk about what positioning is telling us along the way. Thanks for reading!

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Daily Newsletter: CPI Incoming

Daily Newsletter: Thursday, August 15