Daily Preview: Wednesday, July 10
Tuesday, July 9 Review:
While today basically saw a selloff “for ants (a Zoolander reference),” we did close near the lows of the day. SPX touched a high of 5590, creeping ever so close to 5600.
Powell apparently didn’t say anything shocking, judging by the markets reaction. We are simply overbought with poor internals, which tends to not last, but it’s not a set of conditions that makes timing any easier, either. Gamma (GEX) has been decreasing on SPX for the last few days, though the more retail-heavy SPY and QQQ actually saw higher positive GEX today. If recent history has any bearing, SPX and SPY GEX divergences seem to happen around turning points.
SPX GEX has dropped by over a billion since we noted the highest GEX level this year, and that the last two GEX highs also marked market turns in the short term.
SPX GEX is back to where it was in mid-June. Note that we consider anything over 1B to be firmly positive, but the trend is currently down, and we reached an extreme that we thought might signal a turning point, so we are watching for signs of further weakness. We like to poke fun at the well-known contrarian indicators out there (those who are max bullish at the top and max bearish at the bottom), but it’s still prudent to point out that we don’t yet see signs of a solid shorting opportunity. We are overdue for a pullback, but we prefer to wait for more evidence. The way we’re choosing to handle this setup is to simply hedge our long exposure (currently represented by option combination strategies on individual tickers) with a SPY short.
Let’s change it up a little today and look at TSLA, perhaps the most beloved short idea amongst dedicated short sellers and bulls who like to squeeze said short sellers alike. The chart went parabolic, moving from the sub-200 doldrums to 265 in a flash. It’s very extended now, way over any of my indicators, so I personally wouldn’t be interested in buying it unless it dropped from here.
As for shorts, really we need to hold below the Hull Moving Average at 238, but the Hull is rising so 238 may end up morphing into 242-245 in coming days.
GEX is positive, unsurprisingly, but what amazes me is how the 250 cluster shifted higher, so we have a lot of volume and GEX concentrated at 300. Thus, 300 appears to be a fairly high probability target, if GEX remains the same as we see on today’s end-of-day chart:
TSLA open interest shows the related massive call cluster at 300. We focused on NVDA a lot for the first half of the year, and we’ll continue watching for any shift in short-term leadership/rotation into names like TSLA.
What are we Looking For On Wednesday, July 10?
Tomorrow, we have Powell (again) at 10 AM ET, but perhaps the 10-year auction will be the most significant known event tomorrow. Thursday is more important in terms of data releases. We have what we can call a short-term boring market, but we are still finding individual opportunities looking at the GEX Dashboard, and we have subscribers finding great opportunities and mentioning them in our Portfolio Manager chat in Discord, too, so at least we still see opportunities to make money. We’re all looking forward to a little volatility though, that’s for sure!
Stay with us in Discord as we get out the Powell popcorn (again) tomorrow and look for any opportunities that may pop up. We have some very skilled subscribers also sharing their trades as they incorporate GEX..It’s been fun (and profitable at times) to watch. Thanks for reading!
