Weekly Preview: July 22-26
Friday, July 19 & Full Week Review:
Markets continued their move lower last week, with QQQ in particular finishing with a greater number of consecutive red daily candles than any time since April, and a larger magnitude.
With VIX expiration Wednesday and normal monthly OpEx Friday, it’s not surprising that the impressive trend of shorting volatility and rallying the market on an extremely narrow tape finally saw a reversal, not that this current decline will be easy for shorts, either.
Looking at the Keltner channels for QQQ, we can see that 466.48 is the lower Keltner channel, which might be a theoretical target. But this isn’t necessary to see a rebound from oversold conditions, which could happen at any time. If we follow the rule of being long above the Hull moving average and being short below it, any bounce can be viewed as a possible shorting opportunity as long as we are below the 494 area.
The lower Keltner is roughly 2.5% below the current price, which is fairly modest in the grand scheme of things (assuming that level holds).
A quick look at QQQ’s historical GEX chart: we can see that GEX finally reached -1B, the level below which we consider the downtrend to be high odds compared to a positive move.
QQQ is barely touching the green Dealer Cluster Zone, so we are entering the area where we might see dealers become buyers, but the box does allow for continuation lower. This factor seems to back the idea conveyed by the Keltner channels that 466-467 may be the target for this leg down.
We posted a YouTube video this afternoon, and one of the stocks mentioned is NVDA. We think 112-115 is a high probability target, though we acknowledge a bounce could (in theory) start from here and take us back to the red Dealer Cluster Zone. A decline to 112-115 would likely be accompanied by QQQ dropping to that 466-467 area we mentioned, so let’s watch the semis for further signs of either a rebound or continuation. Note that in our Educational Portfolio, we hold PANW, so going short NVDA is viewed through the lens of being offset by a long name in the same sector, fyi.
What are we Looking For In The New Week?
Just when you thought you were save after OpEx, you realize earnings season starts next week. How exhausting! We tend to stay away from earnings plays, but I sometimes see GEX work for some names during this time. But we don’t find the odds to be dramatically improved at all, in our experience. Note the big tech nameas start Tuesday with TSLA and GOOG, and some big defensive names and transports report as well.
In the YouTube video (YouTube link below), we mention this SPX trading channel and go over a simplistic probability exercise to determin how likely we think it is to see the lower yellow line broken, which we assign 17.5%. This is despite the odds of continuing to the line are closer to 50/50. So we don’t necessarily want to take massive directional risk right here, we would rather wait, but that at least gives you some generic info to use as you consider the possibilities.
Overall, we have negative GEX, but we have OpEx behind us and earnings ahead of us, which might be a good setup for a short term rebound. Stay on your toes this week, especially after being this oversold.
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Stay with us in Discord as we share real-time GEX data as we see it and we have some active subscribers also sharing what they see, including in the free channel. Thanks for reading!
