Daily Preview: Friday, July 12
Thursday, July 11 Review:
We finally saw at least some red today, with SPX staging a 58-point intraday reversal from the morning highs. While the opening move was tricky, gamma (GEX) gave us at least enough warning for traders to profitably reposition (in theory) if they took an early loss counting on upside to 5665, which looked possible early on.
We tend to assign higher probability to larger timeframes (daily indicators over hourly, hourly over minutes, etc). and we’ve been warning for the last 2-3 days that the higher timeframe charts were overbought, with yesterday’s 40-point distance over the upper Keltner channel consistent with prior stretch highs since November (on most occasions).
GEX also gave us early warning signs on a zero days to expiration (0DTE) basis, with SPY looking more bearish than SPX early on. 555 was on display as a sizable negative GEX cluster virtually all day, and the low was 555.83. GEX shifted as the morning went on, and when SPX was about at 5615, we saw 5595 become the largest GEX cluster, a nice 20-point difference that allowed for anyone who followed the data to profit. Once we were below 5595, the SPY 555 became the dominant magnet.
QQQ also gave an early warning in that the lack of positive GEX clusters over 562-563 cast doubt on a rise from that point.
SPX closed just barely above the Hull Moving Average, so I would not be surprised to see another attempt higher, though really I’d rather wait for 5470, the middle Keltner channel (with confirmation from GEX) before buying. Dip buyers have been active since the April lows.
Historical GEX reflects a dip back below 1B for SPX, so technically neutral, and SPY is actually negative, the discrepancy being at least partially explained by the impact of 0 DTE option trading by the masses on SPY.
QQQ closed below the Hull Moving Average, allowing for a pathway to either 461 or 481.
GEX plunged into negative territory for QQQ, -681M approximately, which is somewhat unsurprising since we’ve been in a “neutral” range for some time on QQQ as price diverged higher. With tomorrow being Friday, I also would not be surprised to see the “microdip” buyers go hog wild aiming for a Friday rally, especially given the likely desperately sidelined traders who thought they’d get a dip to buy much sooner than now.
Back on the 7th, we noted IWM holding the green Dealer Cluster zone, and the GEX building at 210. It took a few days, and a contrarian down day for SPY/QQQ, but it finally went nuts, gapping up and obliterating the shorts and the upper Keltner was reached. The channel is still sideways, so I wouldn’t be surprised by a pullback soon from these levels (maybe even a retrace back to retest the breakout area), but bigger picture, we think IWM has potential to see a late-stage rally even as QQQ and SPY might roll over further later this year.
What are we Looking For On Friday, July 12?
We have PPI and Consumer Sentiment tomorrow morning as far as economic data, but we will be looking for tactical entries on the long side after closing out a successful AAPL trade and also seeing our SPY hedge partly offset remaining longs. We’ll look forward to interacting with all of you tomorrow!
Stay with us in Discord as we get the CPI number to contend with, 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! Thanks for reading!
