Market Commentary For 3/2/2021

Daily commentary for U.S. broad market indices.

Notice: To view this week’s big picture outlook, click here.

What Happened: After a strong trend day, overnight, U.S. stock index futures fell.

What Does It Mean: As leading economic indicators point to expansion, investors are looking for continued upside.

This comes alongside (1) a material divergence in bond and equity market volatility, as well as (2) a recent convergence in the 10-year Treasury rate and S&P 500 dividend yield. The resolve of these aforementioned dynamics, and positioning, set the market up for a volatile, near-term turn-around.

What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM ET) will likely open inside of prior-value and -range, suggesting a limited potential for immediate directional opportunity.

During Monday’s trade, the best case outcome occurred: the S&P 500 was able to auction and maintain prices above the $3,860.75 low-volume area, or LVNode. Thereafter, participants, as expected, responsively sold the probe into $3,907.75, a high-volume area (HVNode) which offers initiative buyers (responsive sellers) favorable exit (entry).

More On Volume Areas: A structurally sound market will build on past areas of high-volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low-volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low-volume, then future discovery ought to be volatile and quick as participants look to areas of high-volume for favorable entry or exit.

For Tuesday, in the best case, the S&P 500 is able to maintain higher prices, either rotating within yesterday’s trading range, above the $3,860.75 LVNode, or auctioning past the $3,907.75 HVNode. In case of continued upside, a test of the $3,934.25 ledge is likely.

In the worst case, the S&P 500 is not able to maintain higher prices, evidenced by an auction that takes out Monday’s regular-trade low (RTH Low), or $3,858.00. In such a case, participants would look for a response near the $3,837.75 HVNode. Auctioning beneath the HVNode, puts in play the $3,785.00-$3,777.00 gap.

Levels Of Interest: $3,858.00 RTH Low.

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