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Commentary

Daily Brief For May 7, 2021

Daily commentary for U.S. broad market indices.

Market Commentary

Index futures in balance.

  • Fed warns over asset valuations.
  • Ahead: Data on nonfarm payrolls.
  • Value strong, tech relatively weak.

What Happened: U.S. stock index futures auctioned higher overnight ahead of non-farm payroll data.

Graphic updated at 8:43 AM EST.

What To Expect: Friday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open just outside of prior -range and -value, suggesting a limited potential for immediate directional opportunity. 

Adding, during the prior day’s regular trade, the best case outcome occurred, evidenced by initiative trade above the $4,177.25 high volume area (HVNode), which is significant because it marked a crucial pivot, on a larger time frame.

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.

Further, the compressed range over the past few sessions was resolved during Thursday’s end-of-day spike, as participants likely looked to price in expectations of strong jobs data. 

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).

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,179.50 spike base targets puts in play the $4,210.75 minimal excess high. Initiative trade beyond $4,210.75 could reach as high as the $4,235.25 Fibonacci-derived price extension. 

Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.

In the worst case, the S&P 500 trades lower; activity below $4,179.50 puts in play the $4,163.00 POC.

Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Graphic: SHIFT search suggests participants were most interested in call strikes at and above $4,200.00 in the cash-settled S&P 500 Index (INDEX: SPX), Thursday.
Graphic: Daily candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right). The Dow is the strongest of the four. The Nasdaq is the weakest.

News And Analysis

Markets | Credit Review and Outlook: Bonds and the Booming Economy. (Moody’s)

Markets | Fed is warning of hidden leverage lurking in the financial system. (FT)

Markets | EU climate change head warns against curbing carbon price rally. (FP)

Markets | Cathie Wood’s ARK Innovation ETF is selling off. May it worsen? (Barron’s)

Politics | Merkel pushes back on vaccine patent waiver in row with the U.S. (BBG)

Economy | BoE foresees biggest U.K. spending boom since Thatcher era. (BBG)

Markets | Traders ramp up bets on a hawkish Fed surprise at Jackson Hole. (BBG)

Recovery | Gandhi warns ‘explosive’ COVID wave threatens India and the world. (REU)

Markets | Investors eye inflation, seasonally weaker market as tech wobbles. (REU)

What People Are Saying

Innovation And Emerging Trends

FinTech | Citi weighs launching crypto services after a surge in client interest. (FT)

FinTech | Payments, lending, and neobanks rule fintechs in emerging markets. (TC)

FinTech | Chime forced to ditch the use of word ‘bank’ after regulatory pushback. (AB)

About

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.

Disclaimer

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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