Geek’s Daily Preview: Tuesday, July 9
Monday, July 8 Review:
Today’s high was 5583 on SPX, with SPX printing a doji candle, also known as a “reversal candle” or “indecision candle.” We made an unexciting but accurate prediction in our free Discord channel that 5585 appeared to be the continued largest GEX cluster and possible resistance area as early as mid-morning, and sure enough, no higher targets appeared as the day waned.
SPX and SPY are considered the same, except when AI (emphasis on Artificial) glitches and gives SPY a red doji while SPX has a green doji. Oops! Well, there’s always tomorrow, and the line charts.
SPX gamma (GEX) backed off a tad from the extreme we identified from last week, but it’s still in extreme positive territory. it’s noteworthy how little meaningful GEX exists beyond the current moment, and we have GEX-weighted volatility signaling extremely low volatility (a larger timeframe contrarian indicator).
QQQ has entered the rarified air above the upper Keltner channel, which we can see on at least 2-3 prior occasions eventually succumbed to gravity, even if only for a few days. I am amazed by how steep the upward channel is on QQQ, a very bullish setup. But even bullish channels have their highs and lows, even if it takes a magnifying glass (nope, they don’t have that on “smart”phones yet!) to see the zig-zags. QQQ being this far above the upper Keltner has historically meant that the odds are greater for some sort of consolidation or pullback, even in the context of this steep uptrend. Anywhere from 475 to 499 would not surprise me.
QQQ GEX also refuses to enter our 1B bullish range, staying neutral instead. But the GEX-weighted volatility gauge catches my eye as a red flag. In other words, perhaps implied volatility is signaling that things are about to get interesting. Every day I ask myself, “how much longer can they gamma squeeze 1-2 names like they’re penny stocks?” And I’ve been in awe of the answer so far.
But as you can see, we’re still making lower highs on GEX since the first week of June, which I would consider a negative divergence, despite the higher prices.
Let’s get a little more nitty-gritty on the QQQ 3D chart. I didn’t label all of the peaks and valleys, but if you subscribe and hover your mouse over all of them, you’ll see the amount, strike, and date of each. And I can tell you that there is absolutely NO meaningful GEX over 510, regardless of the date. We have 500 out to July 12 and July 19 but we also see a large negative cluster at July 17 with a 490 strike. I find this setup fairly “meh” and it doesn’t make me want to bet on far out of the money (OTM) calls, that’s for sure.
What are we watching As We APproach Tuesday, July 9?
Tomorrow, we have Powell at 10 AM ET, and a couple of bond auctions, not too much else. But Wednesday’s 10-year auction and the dearth of data Thursday and PPI Friday hold potential to at least serve as the excuse for a move. With GEX at an extreme for SPX and neutral for QQQ (despite the elevated price relative to the upper Keltner channel), I am inclined to at least be cautious at these levels, but I wouldn’t consider holding short unless we see more signals combined with a rapidly deteriorating GEX picture.
I am told lines and levels don’t work with the VIX, because that concept doesn’t make sense to some people. But we have a “coincidence” of the VIX stopping at exactly the Hull Moving Average. Draw your own conclusions, put your head in the sand, explain away…But my conclusion is that we are still showing signs of support at this long-term basing area for the VIX. The odds favor either the VIX working its way higher alongside stocks, or counter to stocks, but the short volatility space appears to be so crowded that I have no desire to join the fray, even if the VIX does go lower. The pendulum may be getting closer to the reversal point.
Stay with us in Discord as we get out the Powell popcorn 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!
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