Geek’s Daily Preview: Tuesday, July 30
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Hello fellow Geeks! Let’s jump right into what we saw today in the markets and we’ll glean whatever clues we can from gamma (GEX)+other factors regarding what lies ahead during this busy Fed announcement week.
While markets gapped up today, the performance was fairly weak, turning red for SPX and struggling to close above Friday’s close. We also saw SPX fail to close above the Hull Moving Average.
While the daily candle was red, it’s still potentially a positive that we closed above Friday’s close.
This morning, we noted the GEX cluster at 5500, I notice 5500 also represents the daily Hull Moving Average. While a setup exists to see another leg lower from here, ideally, we will rise to test that 5500 area (and maybe even a little higher to 5529) and then see the markets reaction at those levels before assigning any different odds in this clear downtrend since mid-July. In fact, if you look at the rebound attempt that occurred leading up to the 23rd, the 3rd candle from the lows marked the rebound high and we saw a big gap down on the 24th. Today marks the 3rd candle from the low on the 25th.
GEX for SPX, SPY and QQQ is negative overall, though the trend has been slightly higher in recent days.
From a Keltner channel perspective, we see a widening of the “jaws,” a sign of potential volatility ahead. This makes sense in the context of the mid-week Fed announcement. The fact that the upper Keltner channel is barely ticking down at all is a bullish sign, and in fact we added NVDA as an asymmetric position for the Educational Portfolio today, both based on the potential upside and also to partially hedge other positions in the other direction.
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SPX barely tagged the green Dealer Cluster Zone, but that just might be “enough” to justify a push higher to the red zone aroung 5750. We are now hovering around the zero gamma level, and while a tag of the green box (again) is highly possible, especially with the upcoming Fed announcement, the greater risk/reward is potentially tilted toward a more painful squeeze to the upside, even if only temporarily. We can look at a few other indices and indicators for other signs outside of GEX, which we’ll do in this newsletter.
SPX GEX Levels 7-29-24
On the negative side (primarily as it applies to Wednesday), the largest GEX clusters outside of today’s expiration are on the negative side, 5420 and 5435 SPX for 7/31. This may represent hedging into the Fed, or potentially an outright short, but we need to watch where we are heading into Wednesday before getting comfortable with any sort of positioning.
We’ve taken a more constructive view toward IWM, and it’s certainly performed better since its crazy short squeezing breakout recently, but we do see a rejection(again) of the daily Hull Moving Average and a breach of the upper Keltner channel. 211-212 woud be a fair target in a continued retrace. Fortunately for bulls, the chart is in an uptrend and it still has positive GEX.
Looking at IWM’s GEX chart, we see both sizable volume (light blue representing daily option volume at each strike) and GEX clustered around 230, with 200 representing the green Dealer Cluster Zone. We don’t have to tag that zone, and GEX can shift, but with positive overall GEX, we tilt the odds toward that higher level before more serious attempts below.
What Are We Looking For Heading Into Tuesday The 30th?
We have a scattered set of relatively important economic data points from Finviz, and perhaps the biggest meeting of the week, the FOMC Federal Reserve announcement Wednesday.
Can the VIX give us some sort of clue as to the markets next move? Well, today was arguably the most serious breach of the Hull Moving Average since July 23, but the VIX does seem to be in a rising trend. The doji/reversal candle below the Hull could mean that we’re ready for another spike in volatility, but I think first off, I’d rather see the VIX get crushed toward 13-14 and then rebound higher. With the Fed Wednesday, all sorts of possibilities arise, so seeing both extremes tagged would not surprise me. Always pay attention to your risk, there will always be another trade, but it’s hard to earn and save money! We don’t have to take every possible trade, and I can tell you I’d rather react to the Fed as opposed to make a preliminary directional bet!
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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!
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