Geek’s Daily Preview: Wednesday, July 31
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Today saw a feeble attempt at higher levels, only to see the market reject that attempt and then proceed to take a red bath (and not due to rose petals being tossed in the water). Notably, SPX made a HIGHER low relative to its recent low last week, while QQQ made a LOWER low. I don’t know what to make of it exactly, but my conviction in either direction is certainly lessened when we see inconsistencies amongst indices sharing 8 out of 10 of the top holdings. Maybe this phenomenon can be found in Sun Tzu’s famous book, The Art Of Misleading Markets (I might have the title wrong).
SPX Keltner channels certainly have a setup for 100 points lower, and in Discord we pointed out that the implied volatility of +/- 1.1% seems a bit low, but that double-edged sword can also mean we could move up high enough to rescue those astronauts stuck on the international space station, so CAUTION is the name of the game heading into a major data-dependent (or stuttering speech-dependent) day where the Fed will announce what they’re doing with interest rates as we approach the election.
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SPX GEX moved more negative, still technically within neutral territory, though SPY is more extreme at -2.1 billion. We seem to be making higher lows with GEX recently, but I don’t see anything that definitively says we are done dropping, or that we are due for a strong bounce. Typical to see the market leaving a lot of question marks heading into FOMC.
SPX GEX Levels 7-29-24
We are more bullish on IWM overall, but I don’t like that we’re below the daily Hull Moving Average and now below the top Keltner channel with an indecision candle..I DO like the Keltner channels pointing up in a strong bullish channel, so any drop toward 210-212 is probably a chance to get long, in theory.
Backing the idea that we might be in for a short-term pullback on a micro level, IWM shows us meandering right around the red Dealer Cluster Zone, and volume is notable at lower option strikes.
Yesterday, we said that “ideally” the VIX would see a crush down to 14 or so and then another push higher, but today we pushed higher instead, rejecting at a lower high but maintaining the Hull Moving Average. Without making a prediction, we can reflect on historical instances where the tendency has been for the VIX to get obliterated on Fed days as participants close hedges, but we have the contrary point of implied volatility being quite low…I don’t know what to tell you. Perhaps we see an early push lower for markets (higher for VIX), then a VIX crush and rally later? I’m getting very speculative here, but it wouldn’t surprise me.
What Are We Looking For Heading Into The Final Trading Day of July?
ADP, PMI, and Pending Home Sales certainly give the possibility of a two-faced day tomorrow, though it doesn’t have to go that way…Let’s see how the day starts, and as always, we’ll be watching for any layups on the GEX front if we see obvious clusters show up as the day goes on. We have neutral to negative total GEX, charts that can go either way, and some indices closer to recent highs while others are closer to recent lows, so it’s definitely a mixed picture. Join us in Discord for real-time discussion from us and from our well-informed subscribers who chime in as well!
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