Geek’s Daily Preview: Tuesday, August 6
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Chart courtesy of TradingView.com
Good evening, fellow Geeks! Thursday evening last week, we noted that “440 might have seemed far away yesterday, but today saw a one-day $16 drop for QQQ from high to low, bringing us to just one more day of decline like today to hit the target..” which we felt was relevant to mention given the large gamma (GEX) cluster at 440 that we saw on our charts.
Though this was a good relative measure of how quickly a drop to 440 could occur, we certainly weren’t counting on it by Monday, August 5, but that’s what we got. I will take luck (plus maybe a small contribution of some skill?) ANY day. We had a wild intraday low of 423.45 and the high was 442.29, making for a very volatile and historical day for QQQ.
GEX remains quite negative, as shown on the chart above, but interestingly, GEX actually improved a little from Friday’s close.
We don’t take much solace in this improvement, as there are many other negative factors still in place, but we acknowledge the possibility of a continued bounce before more downside.
In our Educational Portfolio, we closed our last short position this morning and opened a speculative long trade in IWM, in context of our view that we will be looking to short bounces until the picture shifts more positively.
As I write this, NQ futures are up about 300 points from the close, so at least the rebound attempt has continued overnight.
Let’s shift gears to IWM, which exacerbated the big headfake higher by gapping down today. IWM continues to look more bullish than other indices though, closing back above the lower Keltner channel (as shown in the chart above) and sitting in a demand zone consistent with previous areas that found support. We have two very large gaps to potentially close above, and an overall Keltner channel that appears to be widening, mostly to the upside.
The chart below shows that IWM has entered a Dealer Cluster Zone where we might expect a bigger reversal. I do note, however, that we see volume at 190 and lower, so we can’t erase the possibility of another attempt to push downward before that rebound ensues. The VIX hit almost 66 today and it still closed at an elevated 38.5, so we can easily see wide swings up and down for some time.
What Do We Expect Heading Into Tuesday, August 6?
NQ (though NOT QQQ) left a long candle wick on the daily chart, thanks to inclusion of overnight moves. Can we look at this as a barometer of eager buyers in the overnight session at lower levels? It’s certainly possible, though there’s no guarantee the same or additional buyers step up again at that same level, especially if the volume of selling in the cash session during the day takes us to the same lower price. But the VIX at 66 gives us the biggest volatility spike since 2020, and unless the drop that has begun is truly unprecedented, we wouldn’t be surprised to see a continued bounce attempt in coming days. If we do, we’ll exit our IWM long and reinitiate shorts, which we’ll gladly announce on Discord at the time we do.
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