Geek’s daily newsletter
wednesday, July 3 Review:
Today’s review and analysis of tomorrow will be shortened, but we’ll pick back up with a bit more in-depth coverage as we look at next week.
Markets saw follow-through Wednesday after a big day Tuesday, sending SPX and QQQ to new highs. With only half a day of trading, it’s hard to make too much of this, but it’s also a feather in the cap for anyone pointing out that the market has been resilient.
SPX gamma (GEX) actually shifted lower despite price moving to a new high, a bearish divergence.
Dealers did shift a bit with SPX, now reflecting the sell zone to be at least 5600.
The 3D chart shows 5550 as the largest cluster for tomorrow, 5575 in focus Monday, and 5600 with many small clusters throughout mid-July. These levels can act as magnets for price before or leading up to those dates. I wouldn’t be surprised if we saw those numbers hit a little earlier than anticipated, unless we see some sort of pullback from these stretched conditions between now and mid-July.
QQQ also participated in making a new high, exceeding the upper Keltner channel, which can last for a few days but typically not beyond that without consolidation of some sort.
While SPX GEX levels shifted up to 5600, QQQ hasn’t moved much, still reflecting a Dealer Cluster zone at our current spot that we think can mark a sell zone.
Our QQQ 3D chart shows 490 as the largest cluster for tomorrow, but 495 is a sizable cluster as well. When we see such a situation, we watch how the GEX clusters progress throughout the morning, and if the GEX flow is heading in the direction of a higher or lower strike. We’ll watch to see if 495 gains or loses GEX as the day goes on, for instance. 500 is a big target for 7/19 as of now.
What are we looking for heading into FRIday?
We have the 8:30 AM ET employment report tomorrow, which is sure to have some impact on markets. We don’t claim to know which direction will be chosen, but we can say that the bias for now is higher, and a Friday would be an understandable time in which to close the week higher, since we spent the rest of the week working on higher. We do have markets at or above their upper Keltner channels, which is typically a formidable short-term resistance, and total GEX is actually slightly weaker than it was even a week ago, though levels on indices like SPX have shifteds higher with 5600 in focus.
So we continue the theme of having good reasons for bulls and bears alike to be cautious, and we will stay hedged against longs while taking profits in the Educational Portfolio until we sense greater clarity from the GEX picture.
