This morning in our free Discord channel, we noted that gamma (GEX) didn’t paint as clear of a picture as we would like to see to have strong conviction in an intraday trade, but we still made some observations that proved correct, such as the potential SPY 524 magnet that was advertised on the GEX Data Graph while SPY was at 529. We did end up seeing SPY decline toward that mark after we posted the info.
We presented a number of scenarios yesterday that had potential today, but the primary scenario did play out, with SPY reaching the Hull Moving Average (though the level was a bit lower than the 534 we were targeting due to the declining Hull average, closer to 532) and rejecting from that level, cascading lower and closing near lows.
Interestingly, SPY was still unable to print a lower low relative to yesterday or Monday, though QQQ did actually print a slightly lower low compared to yesterday. 497-500 area is still very possible before a larger rebound ensues.

SPY total GEX is still heavily negative, and we don’t see much on the positive side to give us the warm fuzzies that we are on the cusp of a major rebound just yet. Not that it can’t happen, but we simply don’t yet see the evidence that leads us to feel like we have a good “edge” or probability of a sustainable rebound here.

As laid out yesterday as a scenario we would “like” to see today, SPY reaching the Hull Moving Average also meant that QQQ exceeded the Hull before rejecting and heading lower. QQQ printed a lower low relative to yesterday, but we don’t yet know if that means QQQ is some sort of leading indicator that is telling us to prepare for a trip down to 400-417 or whether we will see a larger recovery before those prices are reached. All I know is that it currently does not look pretty, and all daily candles this week have shown long wicks overhead, so every day has been met with eager sellers as the market attempted to recover.

I pulled up the 2018 VIX spike because I noticed the Keltner channels pointing down a lot following Monday’s huge spike. Sure enough, we saw a similar phenomenon in 2018, and the downturn on the lower Keltner didn’t end up being some sort of signal that the VIX was set to plummet. In fact, you can see that the VIX had a number of spikes for several days after the initial big spike, and the 2024 daily action is looking similar to days 2-4 so far. I don’t want to draw too many conclusions from that, but it’s a good reminder that VIX spikes are not always a one-and-done deal, we might see more volatility ahead. VVIX (the index tracking future expected volatility of the VIX itself) hasn’t come down much at all, which is also a red flag for mouth-foaming dip buyers just waiting to buy the dip.

Today saw heightened volume at the 40 and 50 strikes for the VIX, though 20 was also an area of interest.

This week has been a relatively quiet economic week, despite not being quiet at all for the markets, but tomorrow we do have Jobless Claims at 8:30 AM ET and a 30-year bond auction at 1 PM ET, so we will at least have excuses to see more volatility and price swings tomorrow. We hope to see you in Discord where we will provide commentary on anything we find interesting.

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