Categories
Commentary

Daily Brief For May 10, 2021

Daily commentary for U.S. broad market indices.

Market Commentary

Index futures in balance.

  • Inflation talk; reflation back in play.
  • Ahead is Fed speak and earnings.
  • Indices divergent. Expecting chop.

What Happened: U.S. stock index futures were divergent. 

The S&P 500 and Dow Jones Industrial Average discovered higher prices while the Nasdaq 100 and Russell 2000 backed off into the prior range.

Graphic updated at 7:25 AM EST.

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

Adding, during the prior session’s regular trade, the best case outcome occurred, evidenced by initiative trade above the $4,210.75 rally-high, which is significant because that was the highest mark achieved during a prior failed break from balance.

This comes as market participants double down on the so-called “reflation” trade. JPMorgan Chase & Co (NYSE: JPM) strategists, led by Marko Kolanovic, warned many managers will “need to quickly switch gears from their deflationary playbook or risk an ‘inflation shock,’” according to Bloomberg.

Beyond that snippet of fundamental information, we move to what matters right now, technically. Further, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,238.00 overnight high (ONH) puts in play the $4,266.50 Fibonacci-derived price extension.

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

In the worst case, the S&P 500 trades lower; activity below the $4,216.00 low-volume area (LVNode) puts in play the $4,210.75 rally-high. Thereafter, if lower, the HVNodes at $4,199.25, $4,190.75, and $4,177.25 (a major pivot) all become in play.

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.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
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.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for the week ending May 7, 2021. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $404.00, which corresponds with $4,030.00 in the cash-settled S&P 500 Index (INDEX: SPX).

News And Analysis

Commodities | Gasoline futures rise after cyberattack shuts down a vital pipeline. (CNBC)

Recovery | Dr. Fauci says masks could become seasonal after COVID pandemic. (CNBC)

Economy | Euro zone investor morale rises to the highest level since March 2018. (REU)

Markets | Second-biggest cryptocurrency ethereum breaks $4,000 to hit a record. (REU)

Economy | Consumer on one of the healthiest footings in decades, post-COVID-19. (BLK)

What People Are Saying

Innovation And Emerging Trends

Business | UBS dangles $40,000 bonuses to slow junior banker defections. (BBG)

FinTech | Signalling privacy is coming to DeFi, Sienna Network raises $11.2M. (TC)

Trade | Japan mulling alternatives to Suez Canal after the Ever Given shock. (AJ)

ESG | Blackrock insider explains how the ESG investing ‘fantasy’ is distracting. (FP)

Markets | Nasdaq gets the green light from SEC for volatility index options. (TTN)

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, 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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