Daily Brief For April 14, 2021

Daily commentary for U.S. broad market indices.

Market Commentary

Index futures in attempting to balance and validate higher prices.

  • The Fed worried about disinflation.
  • Economic Club hosts Fed’s Powell.
  • Growth and inflation already priced.

What Happened: U.S. stock index futures balanced overnight as participants positioned themselves for a strong earnings season.

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

Adding, during the prior day’s regular trade in the S&P 500, the best case outcome occurred, evidenced by initiative trade above $4,127.00, which is significant because it marked an overnight-high (ONH).

More On Overnight Rally Highs (Lows): Typically, there is a low historical probability associated with overnight rally-highs (lows) ending the upside (downside) discovery process.

It seems that nearly every day this commentary goes out, U.S. index futures are trading sideways or higher. Is that a reason to become bearish? Absolutely not. 

Much of the advance comes in light of a historically bullish period for markets. As a result of supportive structural flows and the pricing in of positive earnings expectations, the S&P 500 is up over 11% since the start of March.

Graphic: April, historically speaking, is usually a good month for equity investors. 

Taking a step back, based on speculative derivatives activity, participants are opportunistically hedging their downside. This is evidenced by ask-side activity in long-dated puts, which provide holders with the right to sell an asset, at a certain price, at some point in the future.

Graphic: The Balance explains how call and put options work. 

At the same time, volatility is falling off of a cliff causing the sensitivity of options to changes in underlying price to increase. As a result, because option dealers are typically long calls and short puts, the “long-gamma” dynamic — crushed volatility and momentum — becomes more pronounced; amid associated hedging, liquidity increases and movement declines. This dynamic will likely resolve itself come April’s monthly options expiration.

Option Expiration (OPEX) Significance: Option expiries mark an end to pinning (i.e, the theory that market makers and institutions short options move stocks to the point where the greatest dollar value of contracts will expire worthless) and the reduction dealer gamma exposure.

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above $4,139.75 excess high targets $4,143.00, a price extension. Initiative trade beyond the $4,143.00 level could reach as high as $4,197.25. In the worst case, the S&P 500 trades lower; activity below the $4,120.00 pull-back low targets the $4,112.75 high-volume area (HVNode) and $4,104.00 spike base. 

More On Volume Areas: A structurally sound market will build on past areas of high-volume (HVNode). Should the market trend for long periods of time, it will lack sound structure (identified as a low-volume area (LVNode) 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.

More On Spikes: Spike’s mark the beginning of a break from value. Spikes higher (lower) are validated by trade at or above (below) the spike base (i.e., the origin of the spike).
Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for April 13. Activity in the options market was primarily concentrated in short- and long-dated tenors, in strikes near $412, which corresponds with $4,120 in the cash-settled S&P 500 Index (INDEX: SPX).
Graphic: SHIFT search shows that trade in the SPDR S&P 500 ETF Trust (NYSE: SPY) was scattered across call and put strikes near current prices.

News And Analysis

Travel | Airlines can’t get the world flying again despite the U.S. boom. (BBG)

Recovery | Amsterdam’s recovery from a deadly outbreak in 1665. (BBG)

Energy | Overhang in oil inventories worked off, outlook improving. (IEA)

Crypto | Yellen, crypto fearmongers get pushback from CIA director. (Forbes)

Markets | Nomura, Credit Suisse tighten financing in hedge fund units. (BBG)

Recovery | Pfizer, and BioNTech on track to beat Q2 EU vaccine goal. (BBG)

Earnings | JPMorgan’s net profit soars 5-fold to $14.3B, the stock slipped. (MW)

Economy | National delinquency rate posted a fifth consecutive decline. (MND)

Economy | Fed needs to do more to keep short-term rates above zero. (REU)

Crypto | IRS says crypto reporting standards would help close the tax gap. (TB)

Markets | SPACs may cast a wider net as competition for targets increases. (CB)

World | Japan to release contaminated Fukushima water after treatment. (REU)

What People Are Saying

Innovation And Emerging Trends

FinTech | Banks, wealth managers, fintech to create ‘Goldilocks’ product. (TA)

NFT | New York Stock Exchange debuts ‘First Trade’ non-fungible tokens. (FN)



Renato founded Physik Invest after going through years of self-education, strategy development, and trial-and-error. His work reporting in the finance and technology space, interviewing leaders such as John Chambers, founder, and CEO, JC2 Ventures, Kevin O’Leary, Canadian businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others, afforded him the perspective and know-how very few come by.

Having worked in engineering and majored in economics, Renato is very detailed and analytical. His approach to the markets isn’t built on hope or guessing. Instead, he leverages the unique dynamics of time and volatility to efficiently act on opportunity.


At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

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